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Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock are included in retained earnings.

Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock are included in retained earnings.

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
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Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock are included in retained earnings. Preferred stock . .$ 1,000,000 Common stock (100,000 shares at $3 par) .....300,000 Paid-in capital in excess of par ..1,700,000 ....... Retained earnings. .10,000,000 Total stockholders' equity....$13,000,000 ........ a. What effects on Mammoth would result from the stock split? b. What change in stock price would you expect to result from the stock split? c. What is the maximum cash dividend per share that the firm could pay on common stock before and after the stock split? (Assume that legal capital includes all paid-in capital.)
Transcribed Image Text:Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock are included in retained earnings. Preferred stock . .$ 1,000,000 Common stock (100,000 shares at $3 par) .....300,000 Paid-in capital in excess of par ..1,700,000 ....... Retained earnings. .10,000,000 Total stockholders' equity....$13,000,000 ........ a. What effects on Mammoth would result from the stock split? b. What change in stock price would you expect to result from the stock split? c. What is the maximum cash dividend per share that the firm could pay on common stock before and after the stock split? (Assume that legal capital includes all paid-in capital.)
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