Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows:

Common stock (3,000,000 shares at $10 par) $ 30,000,000

Capital in excess of par* 15,000,000

Retained earnings 45,000,000

Net worth $90,000,000

*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 companys stock is selling for $36 per share. The company had total earnings of $9,000,000 with 3,000,000 shares outstanding and earnings per share were $3.00. The firm has a P/E ratio of 12

d. What is the investors total investment worth before and after the stock dividend if the P/E ratio remains constant? (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

Before stock Dividend	?
After stock dividend	?

e. Assume Mr. Heart, the president of Health Systems, wishes to benefit stockholders by keeping the cash dividend at a previous level of $1.05 in spite of the fact that the stockholders now have 10 percent more shares. Because the cash dividend is not reduced, the stock price is assumed to remain at $36.

What is an investors total investment worth after the stock dividend if he/she had 100 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? (Input your answer as a percent rounded to 2 decimal places.)