Question
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:
- Declaring a 50% stock dividend, or
- 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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started