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Not excel, hand writing is needed, thank you very much The stock of SunMoon Corp. will go ex-dividend tomorrow. The dividend will be $1.6 per
Not excel, hand writing is needed, thank you very much
The stock of SunMoon Corp. will go ex-dividend tomorrow. The dividend will be $1.6 per share, and there are 20000 shares of stock outstanding. The market value balance sheet for SunMoon is shown below. Assets Amount Liabilities & Amount Equity Cash $ 80,000 Equity $ 800,000 Fixed assets $ 720,000 Total $ 800,000 Total $ 800,000 i. What price is Sun Moon stock selling for today? [2 marks] ii. What price will it sell for tomorrow? Ignore taxes. [2 marks] Now suppose that Sun Moon announces its intention to repurchase $32000 worth of stock instead of paying out the cash dividend. iii. What effect will the repurchase have on an investor who currently holds 100 shares and sells 4 of those shares back to the company in the repurchase? [5 marks] iv. Compare the effects of the stock repurchase to the effects of the cash dividend that you worked out in (i) and (ii) above. [4 marks] Now suppose that Sun Moon again changes its mind and decides to issue a 4% stock dividend instead of either issuing the cash dividend or repurchasing 4% of the outstanding stock. v. How would this action affect a shareholder who owns 100 shares of stock? [4 marks] vi. Compare with your answers in (i) to (iv) in terms of ex-dividend stock price and total wealth of the shareholder. [5 marks] Step by Step Solution
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