The following excerpt is from an article reported in an online issue of Bloomberg.Ford Motor Co. (F) said it will repurchase $1.8 billion of its shares to reduce dilution from recent stock grants to executives.The par amount per share for Ford's common stock is $0.01. Pald-in capital-excess of par is $5.39 per share on average. The marketprice was $16.Required:1. Suppose Ford reacquires 112 million shares through repurchase on the open market at $16 per share. Prepare the appropriatejournal entry to record the purchase. Ford considers the shares It buys back to be treasury stock.2. Suppose Ford considers the shares It buys back to be retired rather than treated as treasury stock. Prepare the appropriate journalentry to record the purchase.Complete this question by entering your answers in the tabs below.Required 1Required 2Suppose Ford reacquires 112 million shares through repurchase on the open market at $16 per share. Prepare the appropriate journalentry to record the purchase. Ford considers the shares it buys back to be treasury stock. (If no entry is required for a transaction/event,select "No journal entry required in the first account field. Enter your answers in millions (.e. 10,000,000 should be entered as 10).)View transaction listJournal entry worksheet

Journal entry is the first stage of the accounting process.Journal entry is used to record business…

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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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You may attempt this question 3 more times for credit Oak Farms is an unlevered firm with 2050 shares outstanding and an EBIT of 675. Corporate eamings are taxed at a rate of 31% Calculate EPS for Oak Farm Note: Your answer should be in dollars and cents. For example, $0.99 Suppose that Oak Farms makes a decision to partition (split) its assets into debt and equity. The firm issues $1550 of debit at a cost of 7.70%, and uses these funds to reduce the amount of equity on its books. The partition does not change the EBIT or the tax rate, but does reduce the number of shares outstanding to 1300 Note: Your answer should be in dollars and cents Compute Oak Farms EPS after the partition s You Must Get Both Parts Conect to Receive Credit CHECK ANSWER
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.
MoonCorp's current share price is $20 per share and the total share outstanding is 20 million. MoonCorp decides to raise $38 million by placing 2 million shares at $19 each to a group of financial institutions. This issue must be approved by its shareholders because more than 1 million shares are placed with institutions and because there is a transfer of wealth from old to new shareholders. True/False
Am. 112.
Bhupatbhai
Seattle Adventures, Incorporated, is trying to decide between the following two alternatives to finance its new $17 million gaming center: a. Issue $17 million, 6% note. b. Issue 1 million shares of common stock for $17 per share with expected annual dividends of $1.02 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share?
An investment bank agrees to underwrite an issue of 15 million shares of stock for Looney Landscaping Corporation. a. The investment bank underwrites the stock on a firm commitment basis, and agrees to pay $10.00 per share to Looney Landscaping Corporation for the 15 million shares of stock. The investment bank then sells those shares to the public for $11.50 per share. How much money does Looney Landscaping Corporation receive? What is the profit to the investment bank? If the investment bank can sell the shares for only $8.50, how much money does Looney Landscaping Corporation receive? What is the profit to the investment bank? b. Suppose, instead, that the investment bank agrees to underwrite the 15 million shares on a best efforts basis. The investment bank is able to sell 13.5 million shares for $10.00 per share, and it charges Looney Landscaping Corporation $0.325 per share sold. How much money does Looney Landscaping Corporation receive? What is the profit to the investment…
Tecumseh Inc. is analyzing the possible merger with Devonshire Inc. Savings from the merger are estimated to be a one-time after-tax benefit of $156 million. Devonshire Inc. has 5.2 million shares outstanding at a current market price of $82 per share. What is the maximum cash price per share that could be paid for Devonshire Inc.? (Omit "$" sign in your response.) Maximum cash price per share $
In previous years, Cox Transport reacquired 2 million treasury shares at $22 per share and, later, 1 million treasury shares at $28 per share. If Cox now sells 2 million treasury shares at $32 per share and determines cost as the weighted-average cost of treasury shares, by what amount will Cox’s paid-in capital—share repurchase increase?
Rally inc, is an all equity firm with assets worth $25B and 10B shares outstanding. Rally plans to borrow $10B and use funds to repurchase shares. Rally’s corporate tax rate is 35% and Rally plans to keep its outstanding debt equal to $10B permanently. Suppose Rally offers $3 per share, and shareholders tender their shares at this price. What will be Rally’s share price after the repurchase?
The Chief Financial Officer (CFO) of the Q14.05T Company is interested to identify the cost of capital and value of the company. Currently, the Q14.05T is an all-equity company. Earnings before interest and taxes (EBIT) for the company is expected to be $86,198 forever, and the cost of capital is currently 14.05 percent. The corporate tax rate applicable to this company is 32.0 percent. Requirement-A. Calculate the market value of Q14.05T. Requirement-B. Suppose Q14.05T floats a $34,579 debt issue and uses the proceeds to reduce share capital. The interest rate is 10.74 percent. Calculate the new value of the business. Requirement-C. Calculate the new value of equity. Requirement-D. Calculate the cost of equity of Q14.05T after the debt issue. Requirement-E. Calculate the weighted average cost of capital. Requirement-F. What are the implications for capital structure?
Dickson Corporation is comparing two different capital structures. Plan I would result in 26,000 shares of stock and $85,500 in debt. Plan II would result in 20,000 shares of stock and $256,500 in debt. The interest rate on the debt is 6 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $95,000. The all-equity plan would result in 29,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) d-1. Assuming that the corporate tax rate is 22 percent, what is the EPS of the firm? (Do not round intermediate calculations and round your answers to 2…

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