Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: Common stock (6,000,000 shares at $10 par) Capital in
Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: Common stock (6,000,000 shares at $10 par) Capital in excess of par Retained earnings S 60,000,000 25,000,000 65,000,000 Net worth $150,000,000 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 $30 per share. The company had total earnings of S15,000,000 with 6,000,000 shares outstanding and earnings per share were $2.50. The firm has a P/E ratio of 12. a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. (Do not round intermediate calculations. Input your answers in dollars, not millions (e.g. $1,230,000).) Capital Accounts Common stock Capital in excess of par Retained earnings Net worth 66.000 37,000 103.000,000 b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.) (Do not round intermediate calculations and round your answers to 2 decimal places.) EPS 227 Stock price 27.27 c. How many shares would an investor have if he or she originally had 120? (Do not round intermediate calculations and round your answer to the nearest whole share.) Number of shares 132
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