Gatto, Incorporated, has declared a $5.40 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $94.00 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Ex-dividend price

Gatto, Incorporated, has declared a $5.40 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $94.00 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Ex-dividend price

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

You are considering purchasing shares in Telstra. From your accounting knowledge you know it is important to look at how Telstra earns an income, not just how much it earns because Telstra’s total profit after tax can be deceiving. It could be overstated because of a profit from the sale of property or because of a tax accounting anomaly. Hence, a record profit this year could lead you to miss the past three years of losses. A) Explain the three criteria you would consider in assessing Telstra’s earnings quality. B) Outline the advantages to a company from having high quality earnings.
The Fourth Corp. is evaluating extra cash dividends versus share repurchases. In either case, $6,675 will be spent. Current earnings are $2.8 per share and the stock currently sells for $67 per share. There are 1,500 shares outstanding. Ignore taxes and any information asymmetry in the financial market. Which of the following is correct? Group of answer choices Shareholder wealth is the same regardless of which payout policy is chosen. Shareholder wealth will be lower if the firm repurchases shares because shares outstanding is reduced as a result of the repurchase. Shareholder wealth will be lower if the firm pays extra cash dividends because share price is lower. Shareholder wealth will be higher if the firm repurchases shares because repurchases can boost share price.
A company with 825,000 shares outstanding sells for $120 per share announced a 5-for-6 reverse stock split. There are no market imperfections or tax effects, what will they sell the stock for after the split?
If instead of issuing a cash dividend a company instead issues a stock dividend, what is the impact to the shareholders? Do they need to report anything that year on their tax return for the dividend and why might a shareholder like getting a stock dividend instead of cash?
KirkWood Corp.(KC) and Lenny Ltd.(LL) are in the same risk class. KC is expected to pay $2 per share dividend next year when the stock will sell for $30. LL has a no-dividend policy. Currently KC stock is selling for $40 per share. KC shareholders expect a $4 capital gain over the next year. Capital gains are taxed at 25%, and dividends are taxed at 30%. a.What is the current price of KC stock? b.If capital gains are also taxed at 28%, what is the share price of KC stock? c.Explain the result you found in part (b).
Johnson & Bradley, Inc. invested $10,000 in 200 shares of ABC stock 18 months ago, and just sold all of them for $12,500. If it is subject to a tax rate of 21%, what is the tax on this investment income? 2 $425 (m) 3 (U7) $375 8 $475 $525 $575 $625 $675 None of the above
When estimating a firm's WACC, the cost of preferred stock to the firm must be adjusted to an after tax codt because at least 70% of dividends recieved by a corporation may be excluded from the corporation taxable income True or false
1) During 2022, Matador declared preferred dividends of $70,000, paid $90,000 for dividends, and received $135,000 for dividends on available-for-sale equity securities. The bookkeeper did not include any of these when calculating ICO. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%.
The Ola Nacho Company has preferred shareholders who earn an annual $2.50 dividend that has never changed. If the market premium is .15, what is the fair value of the preferred stock?
Boulangerie de Patisserie stock is currently trading for €48 per share and is planning to pay a €4 special dividend. Suppose that capital gains are taxed at a 20% and dividends are taxed at 35%. What is the company's expected ex-dividend stock price?
Ewing Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000 would be spent. Current earnings are $3 per share, and the stock currently sells for $50 per share. There are 5,000 shares outstanding. Ignore taxes and other market imperfections (e.g. transaction cost) in answering the questions. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. b) What will be the effect on Ewing’s EPS and PE ratio under the two different scenarios?
An investor currently owns 6104 shares of LIWK Inc. LIWK Inc. has a high-dividend-payout policy and this year will pay $5 cash dividend on its shares selling currently at $69. Assume that an Investor: wants a low-dividend-payout policy. is now taxed at 15% on capital gains and 15% on dividend distributions. originally paid a price for these shares equal to their current price. If an investor need only $500, how many shares should be acquired by the Investor on ex-date in order to undo the dividend policy of LIWK Inc.?