Question
Metromat has the following equity accounts on its balance sheet: Common stock ($2 par, 2.4 million shares) $ 4,800,000 Paid in excess 33,600,000 Retained earnings
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Metromat has the following equity accounts on its balance sheet:
Common stock ($2 par, 2.4 million shares) $ 4,800,000
Paid in excess 33,600,000
Retained earnings 134,400,000
Total common stockholders' equity $172,800,000
The current market price of Metromat's shares is $16. If the firm declares a 15% stock dividend and a $.15 per share cash dividend, what will be the impact on the paid in excess account? Assume a marginal tax rate of 40%.
a. Increases $5.04 million
b. Decreases $2.56 million
c. Increases $5.76 million
d. Does not change
Metromat has the following equity accounts on its balance sheet:
| Common stock ($2 par, 2.4 million shares) | $ 4,800,000 |
| Paid in excess | 33,600,000 |
| Retained earnings | 134,400,000 |
| Total common stockholders' equity | $172,800,000 |
The current market price of Metromat's shares is $16. If the firm declares a 15% stock dividend and a $.15 per share cash dividend, what will be the impact on the paid in excess account? Assume a marginal tax rate of 40%.
| a. | Increases $5.04 million | |
| b. | Decreases $2.56 million | |
| c. | Increases $5.76 million | |
| d. | Does not change |
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Urban Public Finance
Authors: D. Wildasin
1st Edition
0415851882, 978-0415851886
