Question
You own 100 shares in a company called Invest Co. Inc. You have determined from the balance sheet that the firm has equipment worth $900,000,
You own 100 shares in a company called Invest Co. Inc. You have determined from the balance sheet that the firm has equipment worth $900,000, $100,000 cash, and 100,000 shares outstanding.
For each situation (af) below, calculate the price/value of each share in the firm, and explain how your wealth is affected. Ignore tax effects.
a.The firm pays out a dividend of $1 per share.
- The firm buys back 10,000 shares for $10 cash each, and you choose to sell your shares back to the company.
- The firm buys back 10,000 shares for $10 cash each, and you choose not to sell your shares back to the company.
- The firm declares a 2-for-1 stock split.
- The firm declares a 10% stock dividend.
- The firm buys new equipment for $100,000, which will be used to earn a return equal to the firms discount rate.
NO DISCOUNT RATE GIVEN
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Personal Financial Planning For Executives And Entrepreneurs
Authors: Michael J. Nathanson, Jeffrey T. Craig, Jennifer A. Geoghegan, Nadine Gordon Lee, Michael A. Haber, Seth P. Hieken, Matthew C. Ilteris, D. Scott McDonald, Joseph A. Salvati, Stephen R. Stelljes
1st Edition
3030405273, 978-3030405274
