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Hewlard Pockets market value balance sheets illustrate the effects of dividends versus repurchases Assets Liabilities and Shareholders Equity A Original balance sheet Cash $ 150000 Debt

Hewlard Pocket’s market value balance sheets illustrate the effects of dividends versus repurchases.

  Assets Liabilities and Shareholders’ Equity
  A. Original balance sheet

  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 = $1,100,000 / 100,000 = $11

Pocket wins a lawsuit and is paid $130,000 in cash. The market value of the equity rises by that amount, and Pocket decides to pay out $2.30 per share.

a.

What will be Pocket’s stock price if the payout comes as a cash dividend? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Stock price $  per share  

b. What will be Pocket’s stock price if the payout comes as a share repurchase? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Stock price $  per share  

 

Apr 23 2020 View more View Less

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