Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Ace Products sells marked playing cards to blackjack dealers. 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 follows: Common stock (2,400,000 shares at $5 par) $ 12,000,000 Capital in excess of par*5,000,000 Retained earnings 24,000,000 Net worth $ 41,000,000*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 $20 per share. The company had total earnings of $4,800,000 during the year. With 2,400,000 shares outstanding, earnings per share were S 2. The firm has a P/E ratio of 10. 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.g. $1,230,000). 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. How many shares would an investor end up with if he or she originally had 90 shares? Note: Do not round intermediate calculations and round your answer to the nearest whole share. 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

Step: 3

blur-text-image

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

Strategic Public Finance

Authors: Stephen Bailey

1st Edition

0333922212, 978-033392221

More Books

Students also viewed these Finance questions

Question

Summarize life insurance and disability insurance.

Answered: 1 week ago

Question

Discuss voluntary benefits.

Answered: 1 week ago

Question

Identify employee service benefits.

Answered: 1 week ago