The market value balance sheet for Sci-Fi Crimes Manufacturing is shown here. Sc
ID: 2654476 • Letter: T
Question
The market value balance sheet for Sci-Fi Crimes Manufacturing is shown here. Sci-Fi Crimes has declared a 15 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend).
There are 32,000 shares of stock outstanding. What is the current share price? (Round your answer to 2 decimal places. (e.g., 32.16))
What will the ex-dividend price be? (Round your answer to 2 decimal places. (e.g., 32.16))
Market Value Balance Sheet Cash $ 97,000 Debt $ 156,000 Fixed assets 810,000 Equity 751,000 Total $ 907,000 Total $ 907,000
Explanation / Answer
From the balance sheet of the company we can compute the current value of the shares as under:
Net Assets of the company= $751,000
No of equity shares of the company= 32,000 shares
Value per share= $751,000/ 32,000= $23.47
It is to be noted that the balance sheet is at market value, hence we can say that $ 23.47 reflects current market price of the company.
Assuming the par value per share is $ 10.
Stock dividend declared is calculated as under:
Par value per share* Stock dividend percentage* No. of shares outstanding
=10*15%*32,000
=$48,000 or 4,800 shares
A stock dividend is declared from retained earnings which is also a part of equity and no cash is paid. Hence there is no change in the value of Net Assests of the company.
Net Assests being= Assests - Liabilitites= $751,000
Total no of shares= 32,000 + 4,800 shares
Ex-dividend share price= $751,000/36,800
=$20.41
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.