# Principals Finance Assignment 3

Satisfactory Essays
Topics: Dividend, Stock
Ch 10: 3, 4, 5, 7; Ch 14: 4

3. Jersey mining earns \$9.50 a share, sells for \$90, and pays a \$6 per share dividend?
The stock is split two for one and a \$3 per share cash dividend is declared.
(a) What will be the new price of the stock?
New Price: \$90/2 = \$45
(b) If the firm total earning do not change, what is the payout ratio before and after the stock split?

Before: \$6/9.50 = 63.16%
After: \$3/4.75 = 63.16%

4. Firm A had the following selected items on its balance sheet:
Cash: 28,000,000
Common Stock: 100,000,000
(\$50 par, 2,000,000 shares outstanding)
Retained Earnings: 62,000,000
How would each of these accounts appear after:

A. A cash dividend of \$1 per share

2,000,000 *\$1 = \$2,000,000
Cash: 26,000,000
Common Stock: 100,000,000
(\$50 par, 2,000,000 shares outstanding)
Retained Earnings: 60,000,000

B. a 5% stock dividend (fair market value is \$100/share)
\$2,000,000 *5%* \$100 = 10,000,000
\$2,000,000 *5% *\$50 = 5,000,000

Cash: 28,000,000
Common Stock: 105,000,000
(\$50 par, 2,000,000 shares outstanding)
Retained Earnings: 52,000,000

C. A one-for-two reverse split?
\$50*2 = \$100
2,000,000/2 = 1,000,000

Common Stock: 100,000,000
(\$100 par, 1,000,000 shares outstanding)
Retained Earnings: 62,000,000
5. Jackson Enterprises has the following capital (equity accounts:
Common Stock \$100,000
(\$1 par; 100,000 shares outstanding)
Retained Earnings 225,000
The board of directors has declared a 20% stock dividend on Jan 1 and a \$.25 cash dividend on Mar 1. What changes occur in the capital accounts after each transaction if the prices of the stock is \$4?

Jan 1

(20,000 *\$4) = 80,000
(20,000 *\$1) = 20,000

Common Stock \$120,000
(\$1 par; 120,000 shares outstanding)
Retained Earnings 145,000

Mar 1

120,000*.25 = 30,000

Common Stock \$120,000
(\$1 par;

## You May Also Find These Documents Helpful

• Satisfactory Essays

Chap 22: 1, 2, 3, 4, 7, 10, and 11 1. You purchase machinery for \$23,958 that generates cash flow of \$6,000 for 5 years. What is the internal rate of return on the investment? \$23,958/\$6000= 3.993 PVAIF (5 @ 3.993) = 8% 2. The cost of capital for a firm is 10%. The firm has 2 possible investments with the cash flows: Yr 1 A. \$300 B. \$200 Yr 2 A. \$200 B. \$200 Yr 3 A. \$100 B. \$200 A. Each investment costs \$480. What investments should the firm make according to the present value?…

• 1300 Words
• 7 Pages
Satisfactory Essays
• Satisfactory Essays

Assignment 3: Saving and Investing (20.0 points) 1. Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. (3-6 sentences. 2.0 points) when a person loses their job they lose their source of income. When a person loses their income they’ll need to dip into their financial reserves. They need to have a large enough reserve to pay their expenses until they find new work. 2. How many months' worth of expenses do you…

• 660 Words
• 2 Pages
Satisfactory Essays
• Good Essays

semi-annually. Regions Best (EAR) = (1 + 13.17/12)12 – 1 = 14% compounded monthly. 2.) National First Bank would be the best choice. The reason being is that they provide a lower interest rate, which is determined from the solution above. 3.) EAR = ( 1 + 8.6/12)12 - 1 = 8.95% compounded monthly. Monthly payment = 8.95% of \$69,50,000 = \$622025 PVA = C({1 – [1/(1 + r)]t } / r) \$6,950,000 = \$C[1 – {1 / [1 + (.086/12)]60} / (.086/12)] Solving for the payment, we get: C = \$6…

• 575 Words
• 3 Pages
Good Essays
• Good Essays

Assignment 1 Q1.) (5 points) \$50 today is worth MORE than \$50 tomorrow.(Tell True or False) Q2.) \$100 invested for 10 years at 12% interest is worth more in FV terms than \$200 invested for 10 years at 4% interest. (Tell True or False) Q3.) Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost \$200. At an interest rate of 6%, how much does Shawn need to set aside today to purchase the telescope in one year? Q4.)Johnny and…

• 1747 Words
• 7 Pages
Good Essays
• Good Essays

level. (a3) the operating breakeven point in units. (b) Which operating structure has greater operating leverage and business risk? (c) If Greater Manufacturing projects sales of 20,000 units, which operating structure is recommended? 2 Question 3 (14 points) Table 13.1 a) Assuming a 40 percent tax rate, what is the financial breakeven point for each plan? (See Table 13.1) b) What is the degree of financial leverage at a base level EBIT of \$120,000 for both financing plans? The firm has a 40…

• 1546 Words
• 7 Pages
Good Essays
• Satisfactory Essays

U NIVERSITY OF L UXEMBOURG , L UXEMBOURG S CHOOL OF F INANCE Corporate Finance Master in Economics and Finance 2nd Assignment - Stock valuation + Cost of capital Due on 10/3/2014 E XERCISE 1 Starr Co. just paid a dividend of \$2.15 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year, indeﬁnitely. If investors require a 12 percent return on the stock, what is the current price? What will the price be in three years? In 15 years? E XERCISE…

• 483 Words
• 2 Pages
Satisfactory Essays
• Better Essays

theory redundant.” Introduction This assignment will explore whether CAPM makes portfolio theory redundant. The following areas will be discussed; Stages involved, functions and roles, important components, formula of cap-M, positive and negative aspects of Cap-M, all while drawing to the conclusion to whether Cap-M makes portfolio theory redundant. (ref:2) Definition CAPM is defined as Capital asset pricing model. It is an economic theory and is used in Finance to determine a theoretically appropriate…

• 870 Words
• 4 Pages
Better Essays
• Powerful Essays

JWI 530: Financial Management I Academic Submissions and Evaluations Assignment 2: Management Accounting Application Due Week 10, Day 7 (Weight: 22.5%) In this assignment you will demonstrate your understanding of capital investment techniques by evaluating the following three case studies. The homework answers and all this homework help was offered at and you should not submit or make it your own. We provide homework answers at http://allhomeworktutors.com/ and the work may have already…

• 3185 Words
• 34 Pages
Powerful Essays
• Better Essays

Task 1 Identify the different sources of finance available to Mr Norman for buying the new online learning system to expand his service business. There are many different sources of finance available to Mr Norman for investment in order to expand his business. These include: Using personal savings to invest in the business growth Raising equity through issue of new shares. Short term bank loan Long term bank loan Bank overdraft Using retained earnings from the profits earned in the past…

• 3176 Words
• 13 Pages
Better Essays
• Satisfactory Essays

sold = 1400000 PROBLEM:05 Study the comparative balance sheets for Kyprianides Inc. and Pecchia Company in the year 2011. Notice that both companies have the same amount of assets. However, there are some differences in the way the two companies finance those assets. Fill in the spaces on the balance sheets and then answer the following questions. Kyprianides Inc. Pecchia Co. Current Assets Cash and equivalents 200 300 Accounts Receivable 1,100 2,400 Inventory…

• 438 Words
• 2 Pages
Satisfactory Essays