Solve question 6 (context in question 5)

% 5. Regular Dividends [LO1] The balance sheet for Sinking Ship Corp. is shown here in market value terms. There are 14,000 shares of stock outstanding. Market Value Balance Sheet Cash $ 53,700 Equity $438,700 Fixed assets _385,000 Total $438,700 Total $438,700 The company has declared a dividend of $1.30 per share. The stock goes ex dividend tomorrow. Ignoring any tax effects, what is the stock selling for today? What will it sell for tomorrow? What will the balance sheet look like after the dividends are paid? 6. Share Repurchase (L04] In Problem 5, suppose the company has announced it is going to repurchase $18,200 worth of stock. What effect will this transaction have on the equity of the firm? How many shares will be outstanding? What will the price per 603 share be after the repurchase? Ignoring tax effects, show how the share repurchase is effectively the same as a cash dividend. Chapter 17 Question 6 Input Area: $ Repurchase Shares outstanding Dividend per share 18.200 14.000 1,30 $ Equity $ 438.700 Cash Fixed assets Total Market Value Balance Sheet $ 53.700 385.000 $ 438.700 Total $ 438.700 Output Area: Repurchasing the shares will reduce shareholders' equity by $ 18.200,00 Shares bought 580,81 New shares outstanding Price after repurchase The repurchase is effectively the same as the cash dividend because you either hold a share worth or a share worth and in cash. Therefore you participate in the repurchase according to the dividend payout percentage; you are unaffected