The balance sheet for Throwing Copper, Inc., is shown here in market value terms
ID: 2781529 • Letter: T
Question
The balance sheet for Throwing Copper, Inc., is shown here in market value terms. There are 25,000 shares of stock outstanding. Market Value Balance Sheet Cash $ 156,000 Fixed assets 540,750 Equity $ 696,750 Total $ 696,750 Total $ 696,750 The company has declared a dividend of $1.30 per share. The stock goes ex dividend tomorrow. Ignore all tax effects. What is the stock selling for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock price $ What will it sell for tomorrow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock price $ What will the balance sheet look like after the dividends are paid? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Cash $ Fixed assets Equity $ Total $ Total $
Explanation / Answer
1) The selling price of stock today -
Total no. of share outstanding - 25000
Total equity - $696750
thus selling price of stock today = Total equity / Total no. of shares outstanding
= 696750 / 25000
= $27.87
Ex divindent price of stock.- As the stock goes ex-dividend tomarrow, stock price includes dividend amount we have to deduct dividend amount from price of stock.
Hence Exdividend stock price is equal to = Stock price per share trading today - dividend per share
= $27.87 - $1.3
= $26.57 per share
Therefore stock price of 25000 share ex dividend is = $26.57 * 25000
= $6,64,250
Balancesheet after dividends are paid =
Total equity = $6,64,250
Fixed Asset = $5,40,750
Cash remain after paying dividend = $156000 - (25000 * 1.3)
= $156000 - $32500
= $1,23,500
Thus total of fixed asset and cash = $540750 + $123500
= $6,64,250
Total equity after dividend = $6,64,250 (as calculated above.)
Thus total of balancesheet = $6,64,250
Thank you
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