Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has cash of $25,000 in excess of what is necessary to fund its positive NPV projects. The firm is considering using the cash to pay an extra dividend of $25,000 or, alternatively, to repurchase $25,000 of stock. The firm has other assets worth $475,000 (market value). For each of the questions that follow, assume there are no transaction costs, taxes, or other market imperfections. a) Assume the firm pays the $25,000 excess cash in the form of a cash dividend. What will be the firm's earnings per share once the dividend is paid? (3 marks) b) Assume the firm pays the $25,000 excess cash in the form of a cash dividend. You own 1,000 shares and this comprises your total wealth. Once the dividend is paid, what is your total wealth? (3 marks) c) Assume the firm pays the $25,000 excess cash in the form of a cash dividend. What will be the firm's P/E ratio once the dividend is paid? (3 marks) d) After speaking with the board of directors, Alex, Inc. decides to issue a special dividend with a total of 25,000 on March 29 th , 2023, to all shareholders of record as of March 15 th . If you purchase the stock on Tuesday March 14th , right after the market opens. How many dividends will you gain on March 29 th ? Please explain your answer. (2 marks)

Problem #2 Nova Scotia Spirit has a debt/equity ratio of 1.5 which they want to maintain. They expect earnings to be $500,000 this year. Planned capital expenditures this year are $1,400,000. Nova Scotia Spirit has 50,000 shares outstanding with a current market value of $30 per share. We also know that Nova Scotia Spirit has a 60% retention ratio. a) What are the dividends per share? (3 marks) b) Calculate total external debt financing, and total external equity financing required for this year? (4 marks) c) If Nova Scotia Spirit pays no dividends (100% retention ratio), and still wants to maintain a D/E ratio as before, what is the maximum amount of capital expenditures they could do without issuing any new equity? (3 marks) d) Calculate the share price and the number of shares outstanding if Nova Scotia Spirit declares a 3 for 1 split (before any planned capital expenditures). (3 marks) e) Instead of paying a cash dividend or having a stock split, Nova Scotia Spirit decides to distribute a 20% stock dividend to all existing shareholders. Please calculate the new share price after the stock dividend.

Answer in writing please