5. Corporation Analysis Background Information: World Cup Rugby Inc. is authorized to issue an unlimited number of no par value common shares, and has 100,000 shares outstanding. The business has the following balances in its shareholders' equity accounts: Common Shares Retained Earnings Total Equity World Cup Rugby Inc. Corporation Shareholder's Equity $300,000.00 $120,000.00 $420,000.00 As you can see, the company has enough in its Retained Earnings account to declare a dividend. The board of directors has decided to either pay a $1.00 per share cash dividend or issue one share for every four shares each shareholder owns. The current market price is $4.00 per share. Value of Cash Dividend: 100,000 outstanding shares x $1.00 = $100,000.00 Value of Stock Dividend: 100 000/4 x $4.00 = 25,000 shares @ $4.00 each = $100,000.00 What effect does each scenario have on total shareholders' equity? World Cup Rugby Inc. Before Dividend Cash Dividend Stock Dividend Shareholder's Equity Common Shares $300,000.00 $300,000.00 $300,000.00 Retained Earnings $120,000.00 $20,000.00 $120,000.00 Total Equity $420,000.00 $320,000.00 $420,000.00 Book Value per Share: $4.20 $3.20 $3.36 [Equity / # of shares] Required: Assume that you own 800 shares in World Cup Rugby Inc. 1. Calculate the dividend you would receive from a cash dividend and from a stock dividend. 2. As a shareholder, which would you prefer? 3. Explain why in as much detail as possible.
5. Corporation Analysis Background Information: World Cup Rugby Inc. is authorized to issue an unlimited number of no par value common shares, and has 100,000 shares outstanding. The business has the following balances in its shareholders' equity accounts: Common Shares Retained Earnings Total Equity World Cup Rugby Inc. Corporation Shareholder's Equity $300,000.00 $120,000.00 $420,000.00 As you can see, the company has enough in its Retained Earnings account to declare a dividend. The board of directors has decided to either pay a $1.00 per share cash dividend or issue one share for every four shares each shareholder owns. The current market price is $4.00 per share. Value of Cash Dividend: 100,000 outstanding shares x $1.00 = $100,000.00 Value of Stock Dividend: 100 000/4 x $4.00 = 25,000 shares @ $4.00 each = $100,000.00 What effect does each scenario have on total shareholders' equity? World Cup Rugby Inc. Before Dividend Cash Dividend Stock Dividend Shareholder's Equity Common Shares $300,000.00 $300,000.00 $300,000.00 Retained Earnings $120,000.00 $20,000.00 $120,000.00 Total Equity $420,000.00 $320,000.00 $420,000.00 Book Value per Share: $4.20 $3.20 $3.36 [Equity / # of shares] Required: Assume that you own 800 shares in World Cup Rugby Inc. 1. Calculate the dividend you would receive from a cash dividend and from a stock dividend. 2. As a shareholder, which would you prefer? 3. Explain why in as much detail as possible.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![5. Corporation Analysis
Background Information:
World Cup Rugby Inc. is authorized to issue an unlimited number of no par value common shares,
and has 100,000 shares outstanding. The business has the following balances in its shareholders'
equity accounts:
Common Shares
Retained Earnings
Total Equity
World Cup Rugby Inc. Corporation Shareholder's Equity
$300,000.00
$120,000.00
$420,000.00
As you can see, the company has enough in its Retained Earnings account to declare a dividend.
The board of directors has decided to either pay a $1.00 per share cash dividend or issue one
share for every four shares each shareholder owns. The current market price is $4.00 per share.
Value of Cash Dividend: 100,000 outstanding shares x $1.00 = $100,000.00
Value of Stock Dividend: 100 000/4 x $4.00 = 25,000 shares @ $4.00 each = $100,000.00
What effect does each scenario have on total shareholders' equity?
World Cup Rugby Inc.
Before Dividend
Cash Dividend
Stock Dividend
Shareholder's Equity
Common Shares
$300,000.00
$300,000.00
$300,000.00
Retained Earnings
$120,000.00
$20,000.00
$120,000.00
Total Equity
$420,000.00
$320,000.00
$420,000.00
Book Value per Share:
$4.20
$3.20
$3.36
[Equity / # of shares]
Required:
Assume that you own 800 shares in World Cup Rugby Inc.
1. Calculate the dividend you would receive from a cash dividend and from a stock dividend.
2. As a shareholder, which would you prefer?
3. Explain why in as much detail as possible.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb4f47928-04ed-40ee-8b1f-abdfc0ed57f0%2F9b1b06a3-4d7b-4886-8afb-afe38f7ce8e7%2F72dd81_processed.png&w=3840&q=75)
Transcribed Image Text:5. Corporation Analysis
Background Information:
World Cup Rugby Inc. is authorized to issue an unlimited number of no par value common shares,
and has 100,000 shares outstanding. The business has the following balances in its shareholders'
equity accounts:
Common Shares
Retained Earnings
Total Equity
World Cup Rugby Inc. Corporation Shareholder's Equity
$300,000.00
$120,000.00
$420,000.00
As you can see, the company has enough in its Retained Earnings account to declare a dividend.
The board of directors has decided to either pay a $1.00 per share cash dividend or issue one
share for every four shares each shareholder owns. The current market price is $4.00 per share.
Value of Cash Dividend: 100,000 outstanding shares x $1.00 = $100,000.00
Value of Stock Dividend: 100 000/4 x $4.00 = 25,000 shares @ $4.00 each = $100,000.00
What effect does each scenario have on total shareholders' equity?
World Cup Rugby Inc.
Before Dividend
Cash Dividend
Stock Dividend
Shareholder's Equity
Common Shares
$300,000.00
$300,000.00
$300,000.00
Retained Earnings
$120,000.00
$20,000.00
$120,000.00
Total Equity
$420,000.00
$320,000.00
$420,000.00
Book Value per Share:
$4.20
$3.20
$3.36
[Equity / # of shares]
Required:
Assume that you own 800 shares in World Cup Rugby Inc.
1. Calculate the dividend you would receive from a cash dividend and from a stock dividend.
2. As a shareholder, which would you prefer?
3. Explain why in as much detail as possible.
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