Question
Han Manufacturing Company has the stockholders equity account shown below. The firms common stock currently sells for $50 per share. Preferred stock $ 1,250,000 Common
Han Manufacturing Company has the stockholders’ equity account shown below. The firm’s common stock currently sells for $50 per share.
Preferred stock $ 1,250,000
Common stock (5,000,000 shares @ $1 par) 5,000,000
Paid-in capital in excess of par 20,000,000
Retained earnings 30,000,000
Total stockholders’ equity $56,250,000
a. What is the maximum dividend per share that Han Manufacturing can pay? (Assume legal capital includes par value and paid-in capital.)
b. Recast the stockholders’ equity accounts to show independently:
1. A 2 for 1 common stock split.
2. A cash dividend of $3.50 per share.
3. A stock dividend of 10% on the common stock.
c. At what price would you expect the Han Manufacturing stock to sell after:
1. The stock split?
2. The stock dividend?
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