9 and 10

9. Keys Financial has done extremely well in recent years, and its stock now sells for $175 per share. Management wants to get the price down to a more typical level, which it thinks is $25 per share. What stock split would be required to get to this price, assuming the transaction has no effect on the total market value? Put another way, how many new shares should be given per one old share? a. 6.98 b. 7.00 C. 7.35 d. 7.72 e. 8.10 10. Purcell Farms Inc. has the following data, and it follows the residual dividend model. Currently, it finances with 15% debt. Some Purcell family members would like for the dividend payout ratio to be increased. If Purcell increased its debt ratio, which the firm's treasurer thinks is feasible, by how much could the dividend payout ratio be increased, holding other things constant? Capital budget Net income (NI) % Debt now % Debt after change a. 38.6 % b. 40.5 % c. 42.5% d. 44.7% $3,000,000 $3,500,000 15% 60% e. 46.9%