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Sometimes companies pay dividends in the form of aditional shares of stock instead of cash. The impact of making distributions in the form of stock

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Sometimes companies pay dividends in the form of aditional 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 ($5 par, 1,000,000 shares) Contributed capital in excess of par Retained earnings $5,000,000 $750,000 $2,500,000 $8,250,000 Total common stockholders" equity Suppose you own 100 shares of Purple Panda Importers's stock. Purple Panda Importers's stock is trading at a market price of $10 per share, and the company recently declared a 9% stock dividend. You are worried about the dilution of your eanings, 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 Contributed capital in excess of par Retained earnings Total common stockholders' equity $8,250,000 If Purple Panda Importers's pre-dividend earnings per share (EPS) was $1.50, then the post-distribution EPS will be , and the post-distribution market price of Purple Panda Importers's shares should be per share. After the distribution of the stock dividend, you would own 109 shares of Purple Panda Importers's stock, and the value of your wealth will be: O $1,000 O $1,380 O $1,500 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? (Hint: Use the pre-distribution data to answer this question.) O $3,250,000 $7,500,000

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