raded Assignment Read Chapter 14 Back to Assignment Due Thursday 08.02.18 at 11:
ID: 2658241 • Letter: R
Question
raded Assignment Read Chapter 14 Back to Assignment Due Thursday 08.02.18 at 11:45 Attempts: 4. Stock dividends and stock splits Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases Keep the Highest: 12 Aa Aa Consider the following case: Tolbotics Inc. currently has 20,000 shares of common stock outstanding. Its management believes that its current stock price of $100 per share is too high. The company is planning to conduct stock splits in the ratio of 4 for 1 as described in the animation. Eextificate of s 12 If Tolbotics Inc. declares a 4-for-1 stock split, what will be the price of the company's stock after the split, assuming that the total value of the firm's stock remains the same after the split? Scorecard Athletics Corp, is one of Tolbotics's leading competitors. Scorecard Athletics Corp.'s market intelligence research team shares Tolbotics's plans of announcing a stock split, influencing the distribution policy makers. Consequently executives at Scorecard decide to offer stock dividends to its shareholders. If the firm pays a 6% stock dividend, how many shares will the firm issue to its existing shareholders? O 66,000 shares O 62,700 shares O 69,300 shares O 46,200 shares A stock dividend is another way of keeping the stock price from going too high. Scorecard currently has 1,100,000 shares of common stock outstanding Flash Player WIN 30,0,0,134 Save & Con 2004-2016 Apla All rights ? 2013 loyage Laring eacept at noted Ar rights reservedExplanation / Answer
Ans 1
Tolbotics Inc
Number of shares outstanding before stock split is 20,000
Current Market Price = $ 100
Total value of the firm's stock = Shares outstanding * current market price per share
= 20,000 share * $ 100 per share
= $ 2,000,000
Stock split ratio is 4 for 1 which means for each share, holder will get 4 shares of Tolbotic Inc.
Total number of shares outstanding after split = 20000 shares * 4 times
= 80,000 shares
Price of the company stock after split = Current Market Price / split ratio
= $ 100 / 4
= $ 25 per share
Total value of firm stock after spilt = 80,000 share * $ 25 per share
= $ 2,000,000
Conclusion:
If the Tolbotics Inc declares 4 for 1 stock split , the new price per share of the stock shall be $ 25, assuming that the total value of the firm stock remains the same after split as shown in the above analysis.
Ans 2
Scorecard Athletic Corp.
Common Stock Outstanding = 1,100,000 shares
Stock Divedend is 6 %
Number of shares issued as stock dividend = Shares Outstanding * Stock Dividend %
= 1,100,000 * 6 %
= 66,000 shares
Hence, 66,000 shares will be issued to the existing shareholders if Firm's pay 6 % stock dividend.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.