Carla Vista Co. has had 4 years of record earnings. Due to this success, the market price of its 470,000 shares of $2 par value commonstock has increased from $15 per share to $54. During this period, paid-in capital remained the same at $2,820,000. Retained earningsincreased from $4,230,000 to $28,200,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split.He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and (c) parvalue per share.(a)1.Your answer is partially correct.2.Stock dividend-retained earnings$2-for-1 stock split retained earnings $24,393,00028,200,000 (b)Paid-in capitalRetained earningsTotal stockholders' equityShares outstanding(c)12$Original BalancesStock dividend par value per share2-for-1 stock split-par value per share$$After DividendAfter Split000

Stock Dividend:Stock Dividend is the issuance of shares by the company in the form of dividend to…

Answered: Carla Vista Co. has had 4 years of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Lohn Corporation is expected to pay the following dividends over the next four years: $14, $10, $9, and $4. Afterward, the company pledges to maintain a constant 3 percent growth rate in dividends forever. If the required return on the stock Is 12 percent, what is the current share price? Multiple Cholce $56.47 $58.51 $60.27 $65.40 $55.59
Panhandle Industries Inc. currently pays an annual common stock dividend of $3.20 per share. The company's dividend has grown steadily over the past 12 years from $1.60 to its present level; this growth trend is expected to continue. The company's present dividend payout ratio, also expected to continue, is 50 percent. In addition, the stock presently sells at 5 times current earnings (that is, its P/E multiple is 5). Panhandle Industries stock has a beta of 1.15, as computed by a leading investment service. The present risk-free rate is 4.0 percent, and the expected return on the stock market is 12.0 percent. Do not round intermediate calculations. Round your answers to the questions below to two decimal places. a. Suppose an individual investor feels that 11 percent is an appropriate required rate of return for the level of risk this investor perceives for Panhandle Industries. Using the dividend capitalization model and the Capital Asset Pricing Model approaches, determine whether…
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Balling Limited is a company listed on the NZX. Balling has announced it will make a dividend payment at the end of the year of $1.75 per share. The average annual growth rate in the company’s dividends over the past five years has been 5%. Balling’s shareholders have a required rate of return of 15%p.a. Balling’s shares have been trading very consistently around $20 per share for the past few months and analysts suggest this is likely to continue for the foreseeable future. How can you explain this price based on the constant growth dividend discount model?
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P/E AND STOCK PRICE Ferrell Inc. recently reported net income of $10 million. It has 420,000 shares of common stock, which currently trades at $51 a share. Ferrell continues to expand and anticipates that 1 year from now, its net income will be $14.5 million. Over the next year, it also anticipates issuing an additional 63,000 shares of stock so that 1 year from now it will have 483,000 shares of common stock. Assuming Ferrell's price/earnings ratio remains at its current level, what will be its stock price 1 year from now? Do not round intermediate calculations. Round your answer to the nearest cent

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