The number of shares that would be outstanding after a stock split of two-for-one, and its par value. Introduction: Stock split: A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

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Answer 1

Question

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

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A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

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A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 2

Question

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

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Answer 3

Question

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

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Answer 4

Question

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

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Answer 5

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

Answer 6

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Answer 7

Chapter 18, Problem 17P

a.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of two-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Answer 8

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Answer 9

b.

Summary Introduction

To calculate: The number of shares that would be outstanding after a stock split of three-for-one, and its par value.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Answer 10

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

Answer 11

c.

Summary Introduction

To calculate: The EPS of Wilson Pharmaceutical before stock split and after stock splits of 2-for-1 and 3-for-1, if the total earnings are $11 million.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

Earnings per share (EPS):

It is the profit earned by shareholders on each share. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

Answer 12

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

Answer 13

d.

Summary Introduction

To calculate: The price per share of Wilson Pharmaceutical after a 2-for-1 split and a 3-for-1 split, assuming the P/E ratio to be 36.36.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

Answer 14

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

Answer 15

e.

Summary Introduction

To explain: Whether there will be a change in the P/E ratio of Wilson Pharmaceuticals because of the stock split.

Introduction:

Stock split:

A corporate procedure through which the management of a company divides its current shares to increase the shares outstanding is termed as stock split. It helps in boosting the liquidity of shares.

P/E ratio:

It is computed by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 18 - Prob. 1DQ Ch. 18 - Prob. 2DQ Ch. 18 - Prob. 3DQ Ch. 18 - Prob. 4DQ Ch. 18 - Prob. 5DQ Ch. 18 - Prob. 6DQ Ch. 18 - Prob. 7DQ Ch. 18 - Prob. 8DQ Ch. 18 - Prob. 9DQ Ch. 18 - Prob. 10DQ

Solution Summary: The author calculates the number of shares that would be outstanding after a stock split of two-for-one, and its par value.

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Chapter 18 Solutions