Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

At the end of 20X6, Home Ltd. reported the following in shareholders equity: Common shares, no-par value; authorized, unlimited shares; issued, 14,740,000 shares $ 19,242,000

At the end of 20X6, Home Ltd. reported the following in shareholders equity:

Common shares, no-par value; authorized, unlimited shares; issued, 14,740,000 shares $ 19,242,000
Retained earnings 53,160,000
$ 72,402,000

At this time, the shares were trading in the range of $4 to $6 per share on public stock markets. The companys board of directors is contemplating two alternative courses of action:

  1. Declaring a 50% stock dividend, or
  2. Executing a 3-for-2 stock split.

Required: 1. Prepare the shareholders equity section for each alternative, assuming that market value is used to capitalize the stock dividend.

2. What would the expected share price be assuming a share price of $4 for alternative 1 and a share price of $6 for alternative 2? (Round your answers to 2 decimal places.)

3-a. Which alternative would shareholders prefer?

3-b. Not available in Connect. 4. Which alternative would the company prefer?

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

Risk Management In Organisations An Integrated Case Study Approach

Authors: Margaret Woods

2nd Edition

1138632333, 9781138632332

More Books

Students also viewed these Accounting questions