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Hewlard Pockets market value balance sheets illustrate the effects of dividends versus repurchases. Assets Liabilities and Shareholders Equity A. Original balance sheet Cash $ 150,000
Hewlard Pockets market value balance sheets illustrate the effects of dividends versus repurchases. |
Assets | Liabilities and Shareholders Equity | ||||||||||
A. Original balance sheet | |||||||||||
Cash | $ | 150,000 | Debt | $ | 0 | ||||||
Other assets | 950,000 | Equity | 1,100,000 | ||||||||
Value of firm | $ | 1,100,000 | Value of firm | $ | 1,100,000 | ||||||
Shares outstanding = 100,000 | |||||||||||
Price per share = $1,100,000 / 100,000 = $11 | |||||||||||
Pocket wins a lawsuit and is paid $180,000 in cash. The market value of the equity rises by that amount, and Pocket decides to pay out $2.80 per share. |
a. | What will be Pockets stock price if the payout comes as a cash dividend? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Stock price | $ per share |
b. | What will be Pockets stock price if the payout comes as a share repurchase? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Stock price | $ per share |
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