Question
In: Accounting
9.5 You own 100 shares in a company called Invest Co. Inc. You have determined from the...
9.5 You own 100 shares in a company called Invest Co. Inc. You have determined from the balance sheet that the firm has equipment worth $900,000, $100,000 cash, and 100,000 shares outstanding.
For each situation (a–f) below, calculate the price/value of each share in the firm, and explain how your wealth is affected. Ignore tax effects. (12 marks: 2 marks each)
- The firm pays out a dividend of $1 per share.
- The firm buys back 10,000 shares for $10 cash each, and you choose to sell your shares back to the company.
- The firm buys back 10,000 shares for $10 cash each, and you choose not to sell your shares back to the company.
- The firm declares a 2-for-1 stock split.
- The firm declares a 10% stock dividend.
- The firm buys new equipment for $100,000, which will be used to earn a return equal to the firm’s discount rate.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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