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 needs to hold on to $64,000 of cash for a future investment. Nevertheless it decides to pay a cash dividend of $2.70 per share, and to replace cash, as needed, with a new issue of shares. After the dividend is paid and the new stock is issued:

a.	What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price

$ per share

b.	What will be the total value of the company?

Total value

$

c.	What will be the total value of the stock held by new investors? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

Total value

$

d.	What will be the wealth of the existing investors including the dividend payment? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

Existing shareholder wealth