Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Security Data Company has 4 0 comma 0 0 0 shares of common stock worth $ 4 2 per share. The firm most recently had

Security Data Company has 40 comma 000 shares of common stock worth $42 per share. The firm most recently had earnings available for common stockholders of $122,000, but it has decided to retain these funds and is considering a 5% stock dividend in lieu of a cash dividend.
a. The firm's current earnings per share is $.(Round to the nearest cent.)
b. If Sam currently owns 500 shares of the firm's stock, the proportion of the firm Sam currently owns is %.(Round to two decimal places.)
The proportion of the firm Sam will own after the 5% stock dividend is %.(Round to two decimal places.)
c. If Security pays a 5% stock dividend, the market price of stock after the dividend is $.(Round to the nearest cent.)
d. The firm's earnings per share after payment of the stock dividend is $_.(Round to the nearest cent.)
e. The value of Sam's holdings before the stock dividend is $_(Round to the nearest dollar.)
The value of Sam's holdings after the stock dividend is $,(Round to the nearest dollar.)
f. Should Sam have any preference with respect to the proposed stock dividend plan? (Select the best answer below.)
A. Sam should prefer a 5% stock dividend because he will have more shares.
B. Sam should prefer a 5% stock dividend because his total value will be significantly more.
C. Sam should have no preference because his total value will remain essentially the same.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Monetary Policy Strategy

Authors: Frederic S. Mishkin

1st Edition

0262513374, 978-0262513371

More Books

Students also viewed these Finance questions