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Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: The increase in capital in excess of par as

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Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: "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 $28 per share. The company had total earnings of $12,000,000 with 6,000,000 shares outstanding and earnings per share were $2.00. The firm has a P/E ratio of 14 . 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).) 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.) c. How many shares would an investor have if he or she originally had 90 ? (Do not round intermediate calculations and round your answer to the nearest whole share.) d. What is the investor's 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.); 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 $28. What is an investor's total investment worth after the stock dividend if he/she had 90 shares before the stock dividend? f. Under the scenario described in part e, is the investor better off? Yes No 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.)

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