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Hewlard Pocket's market value balance sheet is given. Liabilities and Shareholders' Equity Assets A. Original balance sheet $ 150, e0е Debt 950, eөө Еquity $1,100,000 Value of firm Cash Other assets 1,100,000 $1,100,000 Value of firm Shares outstanding - 100,000 Price per share = $1,100,000 / 100,000 = $11 Pocket needs to hold on to $90,000 of cash for a future investment. Nevertheless, it decides to pay a cash dividend of $2.60 per share and to replace cash as needed with a new issue of shares. After the dividend is paid and the new stock is issued: a. What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the total value of the company? (Enter your answers in whole dollars, not in millions.) c. What will be the total value of the stock held by new investors? (Enter your answers in whole dollars, not in millions. Do not ro intermediate calculations. Round your answer to the nearest whole dollar amount.)

Hewlard Pocket's market value balance sheet is given. Liabilities and Shareholders' Equity Assets A. Original balance sheet $ 150, e0е Debt 950, eөө Еquity $1,100,000 Value of firm Cash Other assets 1,100,000 $1,100,000 Value of firm Shares outstanding - 100,000 Price per share = $1,100,000 / 100,000 = $11 Pocket needs to hold on to $90,000 of cash for a future investment. Nevertheless, it decides to pay a cash dividend of $2.60 per share and to replace cash as needed with a new issue of shares. After the dividend is paid and the new stock is issued: a. What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the total value of the company? (Enter your answers in whole dollars, not in millions.) c. What will be the total value of the stock held by new investors? (Enter your answers in whole dollars, not in millions. Do not ro intermediate calculations. Round your answer to the nearest whole dollar amount.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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### Hewlard Pocket's Market Value Balance Sheet #### A. Original Balance Sheet | **Assets** | **Liabilities and Shareholders’ Equity** | |------------------|------------------------------------------| | Cash | $150,000 | Debt | $0 | | Other assets | $950,000 | Equity | $1,100,000 | | **Value of firm**| **$1,100,000** | **Value of firm** | **$1,100,000** | **Shares outstanding**: 100,000 **Price per share**: \[ \frac{\$1,100,000}{100,000} = \$11 \] #### Upcoming Transactions Hewlard Pocket needs to hold on to $90,000 of cash for a future investment. It has decided to pay a cash dividend of $2.60 per share and to raise additional cash needed through a new issue of shares. #### Required Calculations: 1. **Price per Share (post dividend and new issue)**: - **Instruction**: Do not round intermediate calculations. Round your answer to 2 decimal places. 2. **Total Value of the Company**: - **Instruction**: Enter your answer in whole dollars, not in millions. 3. **Total Value of Stock Held by New Investors**: - **Instruction**: Enter your answer in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. 4. **Wealth of Existing Investors Including the Dividend Payment**: - **Instruction**: Enter your answer in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. #### Result Table: | **a. Price** | $ ___ per share | |-----------------------------------------------|-----------------| | **b. Total value of the company** | $1,040,000 | | **c. Total value of the stock held by new investors**| $ ___ | | **d. Wealth of existing investors including the dividend payment**| $ ___ | ### Explanation of Financial Concepts 1. **Assets**: Resources owned by the firm, such as cash and other assets. 2. **Liabilities**: The company’s financial obligations. 3. **Shareholders’ Equity**: Equity capital provided by shareholders, representing ownership in the firm.
Transcribed Image Text:### Hewlard Pocket's Market Value Balance Sheet #### A. Original Balance Sheet | **Assets** | **Liabilities and Shareholders’ Equity** | |------------------|------------------------------------------| | Cash | $150,000 | Debt | $0 | | Other assets | $950,000 | Equity | $1,100,000 | | **Value of firm**| **$1,100,000** | **Value of firm** | **$1,100,000** | **Shares outstanding**: 100,000 **Price per share**: \[ \frac{\$1,100,000}{100,000} = \$11 \] #### Upcoming Transactions Hewlard Pocket needs to hold on to $90,000 of cash for a future investment. It has decided to pay a cash dividend of $2.60 per share and to raise additional cash needed through a new issue of shares. #### Required Calculations: 1. **Price per Share (post dividend and new issue)**: - **Instruction**: Do not round intermediate calculations. Round your answer to 2 decimal places. 2. **Total Value of the Company**: - **Instruction**: Enter your answer in whole dollars, not in millions. 3. **Total Value of Stock Held by New Investors**: - **Instruction**: Enter your answer in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. 4. **Wealth of Existing Investors Including the Dividend Payment**: - **Instruction**: Enter your answer in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. #### Result Table: | **a. Price** | $ ___ per share | |-----------------------------------------------|-----------------| | **b. Total value of the company** | $1,040,000 | | **c. Total value of the stock held by new investors**| $ ___ | | **d. Wealth of existing investors including the dividend payment**| $ ___ | ### Explanation of Financial Concepts 1. **Assets**: Resources owned by the firm, such as cash and other assets. 2. **Liabilities**: The company’s financial obligations. 3. **Shareholders’ Equity**: Equity capital provided by shareholders, representing ownership in the firm.
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