Multiple Choice Drop-Downs

Common Stock: $16,588,800; $12,800,864; $12,800,000; $13,824,000 Contributed capital in excess of par: $2,224,000; $2,128,000; $12,976,000; $18,000,000 Retained Earnings: $1,952,000; $2,224,000; $13,824,000; -$716,800

"EPS will be _______" : $2.06; $2.22; $2.59; $2.89 "shares would be ________" : $1.78; $22.22; $20.56; $14.81

8. Stock dividends Sometimes companies pay dividends in the form of additional shares of stock instead of cash. The impact of making distributions in the form of stock dividends is reflected in the statement of stockholders' equity. Consider the case of the Purple Panda Importers Company: The pre-stock dividend common stockholders' equity statement for Purple Panda Importers Company is as follows: Purple Panda Importers Company Pre-Stock Dividend Common Stockholders' Equity Common stock ($8 par, 1,600,000 shares) $12,800,000 $1,200,000 Contributed capital in excess of par Retained earnings $4,000,000 Total common stockholders' equity $18,000,000 Suppose you own 100 shares of Purple Panda Importers's stock. Purple Panda Importers's stock is trading at a market price of $16 per share, and the company recently declared a 8% stock dividend. You are worried about the dilution of your earnings, so you'd like to make some calculations to evaluate the impact of the stock dividend on your investment. Based on your calculations, complete the following table: Purple Panda Importers Company Post-Stock Dividend Common Stockholders' Equity Common stock $13,824,000 Contributed capital in excess of par Retained earnings Total common stockholders' equity $18,000,000 and the post- 1 If Purple Panda Importers's pre-dividend earnings per share (EPS) was $2.40, then the post-distribution EPS will be distribution market price of Purple Panda Importers's shares should be per share. After the distribution of the stock dividend, you would own 108 shares of Purple Panda Importers's stock, and the value of your wealth will be:(Note: Do not round intermediate calculation) $1,780 $2,220 $2,400 $1,600 Suppose the state in which Purple Panda Importers is registered levies a capital impairment law. What will be the maximum amount of dividends that Purple Panda Importers can distribute if the capital impairment provisions define capital as the par value of the firm's common stock and the capital in excess of par account? (Hint: Use the pre-distribution data to answer this question.) $5,200,000 $4,000,000