Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ace Products sells marked playing cards to blackjack deaiers. It has not paid a dividend in many years, but is currently contemplating some kind of

image text in transcribed
Ace Products sells marked playing cards to blackjack deaiers. It has not paid a dividend in many years, but is currently contemplating some kind of dividend. The capital accounts for the firm are as follow: -The increase in capital in excess of par as a result of a stock dividend is equal to the new shares created times (Market price - Par value). The company's stock is selling for $30 per share. The company had total earnings of $7,500,000 during the year. With 2,500,000 shares outstanding, earnings per share were \$3. The firm has a PiE ratio of 10. a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. Note: Do not round intermediate calculations. Input your answers in dollars, not millions (e.9-\$1,230,000). b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant) Note: Do not round intermediate calculations and round your answers to 2 decimal places. c. How many shares would an investor end up with if he or she originally had 120 shares? Note: Do not round intermediate calculations and round your answer to the nearest whole share. d. What is the investor's total investment worth before and after the stock dividend if the P/E ratio remains constant? Note: Do not round intermediate calculations and round your answers to the nearest whole dollar

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Handbook For Investment Committee Members

Authors: Russell L. Olson

1st Edition

0471719781, 978-0471719786

More Books

Students also viewed these Finance questions