Cullumber Company has had 4 years of record earnings. Due to this success, the market price of its 500,000 shares of $2 par valuecommon stock has increased from $14 per share to $53. During this period, paid-in capital remained the same at $3,000,000. Retainedearnings increased from $4,500,000 to $30,000,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and(c) par value per share.(a)1.2.(b)Paid-in capitalStock dividend - retained earningsRetained earnings2-for-1 stock split - retained earnings(c)Total stockholders' equity $Shares outstanding1.2.$Stock dividend - par value per share$Original Balances2-for-1 stock split - par value per share$$$$After Dividend$$After Split

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

Answered: Cullumber Company 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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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…
Circuit City Stores (CC) recently paid a $.16 dividend. The dividend is expected to grow at a 23 percent rate. At the current stock price of $7.96, what is the return shareholders are expecting?
The most recent dividend paid by Altier Corporation was $3.25. That dividend is expected to grow by 8% this year, and 7% in year two. Beginning in year three, the dividend is expected to grow at a constant rate of 5%. With a 12% required return, what is a share of this company's common stock worth today?
HEADLAND Ltd. had earnings per share of $4 as of December 31, 2022, but paid no dividends. Earnings were expected to grow at 16.1 percent per year for the following five years. HEADLAND Ltd. will start paying dividends for the first time on December 31, 2027, distributing 50 percent of its earnings to shareholders. Earnings growth will be 5 percent per year for the next six years (that is, from January 1, 2028, through to December 31, 2033). Starting on December 31, 2033, HEADLAND Ltd. will begin to pay out 80 percent of its earnings in dividends and earnings growth will stabilize at 2 percent per year in perpetuity.The required rate of return on HEADLAND stock is 10 percent. What should be the current share price of HEADLAND? (Round intermediate calculations to 6 decimal places, e.g. 15.612125 and the final answer to 2 decimal places, e.g. 15.61.) Current share price of HEADLAND $
The Athletic Village has done very well the past year, and its stock price is now trading at $80 per share. Management is considering either a 100% stock dividend or a 2-for-1 stock split. Required: Complete the following table comparing the effects of a 100% stock dividend versus a 2-for-1 stock split on the stockholders’ equity accounts, shares outstanding, par value, and share price. (Round "Par value per share" to 3 decimal places.) Before After 100% Stock Dividend After 2-for-1 Stock Split Common stock, $0.01 par value $12 Additional paid-in capital 23,990 Total paid-in capital 24,002 Retained earnings 14,900 Total stockholders' equity $38,902 Shares outstanding 1,200 Par value per share $0.01 Share price $80
CARLA Ltd. had earnings per share of $4 as of December 31, 2022, but paid no dividends. Earnings were expected to grow at 14.3 percent per year for the following five years. CARLA Ltd. will start paying dividends for the first time on December 31, 2027, distributing 50 percent of its earnings to shareholders. Earnings growth will be 5 percent per year for the next six years (that is, from January 1, 2028, through to December 31, 2033). Starting on December 31, 2033, CARLA Ltd. will begin to pay out 80 percent of its earnings in dividends and earnings growth will stabilize at 2 percent per year in perpetuity.The required rate of return on CARLA stock is 10 percent. What should be the current share price of CARLA? (Round intermediate calculations to 6 decimal places, e.g. 15.612125 and the final answer to 2 decimal places, e.g. 15.61.) LA S $ Current share price of CARLA
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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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