Question

In: Finance

Stock split versus stock dividend---Firm   Mammoth Corporation is considering a​ 3-for-2 stock split. It currently has...

Stock split versus stock dividend---Firm   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 is included in retained earnings.

Preferred stock $ ​ 1,000,000

Common stock (130,000 shares at​ $5 ​par) 650,000

​Paid-in capital in excess of par ​1,700,000

Retained earnings 10,000,000

Total​ stockholders' equity $13,350,000

a. What effect on​ Mammoth's equity account 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.)

d. Contrast your answers to parts a through c. with the circumstances surrounding a​ 50% stock dividend.

e.  Explain the differences between stock splits and stock dividends.

Solutions

Expert Solution

jeff jeffy answered 7 months ago
Next > < Previous

Related Solutions

Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholder’s equity position shown....
Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholder’s equity position shown. The current stock price is $120 per share. The most recent period’s earning available for common stock is 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 stockholder equity $13,000,000 a. What effects on Mammoth would result in a stock split? b. What change in stock price...
3. What is the difference between a stock dividend and a stock split?
3. What is the difference between a stock dividend and a stock split?
explain the difference between: a cash dividend, a stock dividend, and a stock split? 2.explain the...
explain the difference between: a cash dividend, a stock dividend, and a stock split? 2.explain the difference between: authorized shares, issued shares, outstanding shares, and treasury stock?
Nell Corporation stock is currently selling for $18.50. The stock is expected to pay a dividend...
Nell Corporation stock is currently selling for $18.50. The stock is expected to pay a dividend of $75 at the end of the year. Dividends are expected to grow at a constant rate of 4% indefinitely. Compute the expected rate of return on Nell Corporation stock.
Use the following to answer questions 13 - 17 KC Corp.'s management is considering either a 100% stock dividend or a 2-for-1 stock split.
Use the following to answer questions 13 - 17KC Corp.'s management is considering either a 100% stock dividend or a 2-for-1 stock split.Complete the following chart to assist in answering the following: 13. $_________ After the 100% stock dividend what amount is in Total paid-in capital account?14. $_________ After the 100% stock dividend what amount is in the retained earnings account?15. $_________ After the 100% stock dividend what is the par value per share?16. $_________ After the 2-for-1 stock split...
Stock dividend versus stock—Firm The board of Wicker Home Health​ Care, Inc., is exploring ways to...
Stock dividend versus stock—Firm The board of Wicker Home Health​ Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 20% stock dividend​ and, alternatively, a​ 5-for-4 stock split. At the present​ time, the​ firm's equity account and other​ per-share information are given as​ follows: Preferred stock $ 0 Common Stock...
Why might a stock dividend or a stock split be of limited value to an investor?...
Why might a stock dividend or a stock split be of limited value to an investor? - 5 points needed
3. A rapidly growing firm is currently paying a dividend of $4.00. The dividend growth rate...
3. A rapidly growing firm is currently paying a dividend of $4.00. The dividend growth rate is expected to be 8% for the next 3 years. The dividend growth rate after the first 3 years is expected to be 2% annually. The expected return on the market is 7%, the risk free rate is 3% and the firm’s Beta is 1.20. a. Calculate the estimated price (intrinsic value) for a share of this firm’s stock. b. What does this firm’s...
Contrast the treatment of a large stock dividend and a stock split. Please write in essay...
Contrast the treatment of a large stock dividend and a stock split. Please write in essay form and be detailed.
a) What’s the difference between a stock dividend and a stock split?     b)     How do...
a) What’s the difference between a stock dividend and a stock split?     b)     How do stock dividends and splits affect stock prices?     c)     In what situation should a firm pay a stock dividend?     d)     In what situation should a firm split its stock?     e)    Consider the following case: You have 100 common shares of Comm Suppliers Inc. (CSI) The EPS is $4.00, the DPS is $2.00; and the stock sells for $60 per share. If CSI...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT