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Health Systems Inc. is considering a 15 percent stock dividend. The capital accounts are as follows: Health Systems Inc. is considering a 15 percent stock

Health Systems Inc. is considering a 15 percent stock dividend. The capital accounts are as follows:

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Health Systems Inc. is considering a 15 percent stock dividend. The capital accounts are as follows: Common stock (5,000,000 shares at $10 par) Capital in excess of par* Retained earnings Net worth CH $ 50,000,000 20,000,000 75,000,000 $145,000,000 *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 $12,500,000 with 5,000,000 shares outstanding and earnings per share were $2.50. The firm has a P/E ratio of 12. 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.); Total Investment 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 $1.10 in spite of the fact that the stockholders now have 15 percent more shares. Because the cash dividend is not reduced, the stock price is assumed to remain at $30. What is an investor's total investment worth after the stock dividend if he/she had 100 shares before the stock dividend? Total investment f. Under the scenario described in part e, is the investor better off? Yes O 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.) Dividend yield %

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