Answered step by step
Verified Expert Solution
Question
1 Approved Answer
d. 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
d. 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. e. Assume Mr. Heart, the president of Health Systems, wishes to benefit stockholders by keeping the cash dividend at a previous level of $1.15 in spite of the fact that the stockholders now have 20 percent more shares. Because the cash dividend is not reduced, the stock price is assumed to remain at $35. What is an investor's total investment worth after the stock dividend if he/she had 90 shares before the stock dividend? g. As a final question, what is the dividend yield on this stock under the scenario described in part e ? Note: Input your answer as a percent rounded to 2 decimal places. *The increase in capital in excess of par as a result of a stock dividend is equal to the shares created times (Market price - Par value). The company's stock is selling for $35 per share. The company had total earnings of $7,500,000 with 3,000,000 shares outstanding and earnings per share were $2.50. The firm has a P/E ratio of 14
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