Question 1 Mpillar Ltd has a stockholders' equity account, as shown below. The common stock of the company is now trading at $24 per share. Preferred stock Common stock (4,000,000 shares @ $1 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $ 600,000 4,000,000 25,000,000 20,000,000 49,600,000 On the other hand, Mpillar announced a $5 million stock buyback within six months. Recently, the buyback market has exploded, with repurchases virtually equaling capital expenditures. However, others have questioned the actions and intentions that led to such a large buyback. Many corporations repurchase shares in addition to giving cash to shareholders because they believe their stock is undervalued. Yet, according to new research, firms frequently employ creative financial reporting to lower profitability before buybacks, making the stock appear undervalued and driving the stock's price to rise after the buyback. This pleases investors, who then increase the effect by driving up the price. Required: (a) Do you think corporations would manipulate the value of their stock before launching a buyback, or do you think corporations are more likely to launch a buyback to increase shareholder value? (8 marks) (b) Calculate Mpillar's maximum dividend per share (Assume capital includes all paid- in capital.). (3 marks) (c) Demonstrate a part of the stockholders' equity accounts based on the options listed below. (i) a 2-for-1 stock split of the common stock. (4 marks) (ii) a cash dividend of $1.50 per share. (4 marks) (iii) a stock dividend of 10% on the common stock. (6 marks) [Total: 25 Marks]