1. You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.40 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $72 per share. The required return on Avondale stock is 20 percent.

Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Share price$

If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Number of shares$

What would your cash flow be for each year for the next two years? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations.)

Cash flow$

2. The owners' equity accounts for Freya International are shown here.

Common stock ($.40 par value)$ 32,500

Capital surplus315,000

Retained earnings698,120

Total owners equity$1,045,620

a-1

If Freya declares a four-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.)

New shares outstanding

a-2

What is the new par value per share? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.)

New par value$ per share

b-1

If Freya declares a one-for-five reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.)

New shares outstanding

b-2

What is the new par value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

New par value$ per share

3. The owners equity accounts for Freya International are shown here:

Common stock ($.50 par value)$ 40,000

Capital surplus335,000

Retained earnings738,120

Total owners equity$1,113,120

a-1If Freya stock currently sells for $25 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? (Do not round intermediate calculations.)

New shares issued

a-2Show how the equity accounts would change. (Do not round intermediate calculations.)

Common stock$

Capital surplus

Retained earnings

Total owners equity$

b-1If instead Freya declared a 25 percent stock dividend, how many new shares will be distributed? (Do not round intermediate calculations.)

New shares issued

b-2Show how the equity accounts would change. (Do not round intermediate calculations.)

Common stock$

Capital surplus

Retained earnings

Total owners equity$