Additional exercise topic 8

Answer all questions.

QUESTION 1

DD company has a total market value of $10 million and it has 1 million shares outstanding, then each share should sell on the open market for $10.

a) If the company then issues a 15% stock dividend, what is the number of shares outstanding?

b)What is the market value per share after the stock dividend

QUESTION 2

The MBG Company has earnings available for common stockholders of $4 million and has 320,000 shares of common stock outstanding at $50 per share. The firm is currently contemplating the payment of $3.50 per share in cash dividends.

a) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio.

b)If the firm can repurchase stock at $54 per share, how many shares can be purchased in order to make the proposed cash dividend payment?

c) How much will the EPS be after the proposed repurchased?

QUESTION 3

Mario's has 18,000 shares of stock outstanding with a par value of $1 per share and a market price of $4 a share. The balance sheet shows $18,000 in the common stock account, $336,000 in the paid in surplus account, and $64,000 in the retained earnings account. The firm just announced a 5-for-1 stock split.

a) How much additional shares should be issued?

b) What will the paid in surplus account value be after the split?

c) What will the price be after the split?

QUESTION 4

The Peanut Shack has 6,000 shares of stock outstanding with a par value of $1 per share. The current market value of the firm is $145,600. The company just announced a 3-for-2 stock split. What will the market price per share be after the split?How many shares of stock will be outstanding after the split?

QUESTION 5

Miya, a single investor owns 1000 shares of Advance C-Synergy (ACS), common stock. She originally bought the stock two years ago at initial public offering (IPO) price at RM5 per share. The stock of this fast growing technology company is currently trading for RM21 per share, so the current valueof her advance ACSstock is RM21,000 (RM21 x 1000). Because the firm's board of director believe that the stock would trade more actively in the RM 7 to RM8 price range, it just announced a 3-for-1 stock split.

a)Compare the total value of Miya's stock holding before and after the stock split.

b)If the analyst believe that the price will fall 25% from the initial price after the split, does Miya experience any gain or loss on the stock?