Question Description At the end of 20X6, Home Ltd. reported the following in shareholders’ equity: Common shares, no-par value; authorized, unlimited shares; issued, 1,400,000 shares $1,350,000 Retained earnings $53,080,000 72,205,000 At this time, the shares were trading in the range of $2 to $4 per share on public stock markets. The company’s board of directors is contemplating two alternative courses of action: 1.Declaring a 50% stock dividend, or 2.Executing a 3-for-2 stock split. A. Prepare the shareholders’ equity section for each alternative, assuming that market value is used to capitalize the stock dividend. B. What would the expected share price be assuming a share price of $4 for alternative 1 and a share price of $6 for alternative 2? (Round your answers to 2 decimal places.) C. Which alternative would shareholders prefer? Which alternative would the company prefer?
Question Description At the end of 20X6, Home Ltd. reported the following in shareholders’ equity: Common shares, no-par value; authorized, unlimited shares; issued, 1,400,000 shares $1,350,000 Retained earnings $53,080,000 72,205,000 At this time, the shares were trading in the range of $2 to $4 per share on public stock markets. The company’s board of directors is contemplating two alternative courses of action: 1.Declaring a 50% stock dividend, or 2.Executing a 3-for-2 stock split. A. Prepare the shareholders’ equity section for each alternative, assuming that market value is used to capitalize the stock dividend. B. What would the expected share price be assuming a share price of $4 for alternative 1 and a share price of $6 for alternative 2? (Round your answers to 2 decimal places.) C. Which alternative would shareholders prefer? Which alternative would the company prefer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of 20X6, Home Ltd. reported the following in shareholders’ equity:
| Common shares, no-par value; authorized, unlimited shares; issued, 1,400,000 shares | $1,350,000 |
| $53,080,000 | |
| 72,205,000 | |
At this time, the shares were trading in the range of $2 to $4 per share on public stock markets. The company’s board of directors is contemplating two alternative courses of action:
1.Declaring a 50% stock dividend, or
2.Executing a 3-for-2 stock split.
A. Prepare the shareholders’ equity section for each alternative, assuming that market value is used to capitalize the stock dividend.
B. What would the expected share price be assuming a share price of $4 for alternative 1 and a share price of $6 for alternative 2? (Round your answers to 2 decimal places.)
C. Which alternative would shareholders prefer? Which alternative would the company prefer?
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