Suppose that you own 2,200 shares of Nocash Corp. and the company is about to pay a 25% stock dividend. The stock currently sells at $100 per share.

 

a. What will be the number of shares that you hold after the stock dividend is paid? (Do not round intermediate calculations.)

 

  Number of shares

 

b. What will be the total value of your equity position after the stock dividend is paid? (Do not round intermediate calculations.)

 

  Total value $

 

c. What will be the number of shares that you hold if the firm splits five for four instead of paying the stock dividend?

 

  Number of shares hold

 

2.     Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 1.5 million shares that are outstanding. Shareholders require a 10% rate of return from Consolidated stock.

 

a. What is the price of Consolidated stock?

 

  Stock price $

 

b. What is the total market value of its equity? (Enter your answer in millions.)

 

  Market value of equity $ million

 

Consolidated now decides to increase next year’s dividend to $20 a share, without changing its investment or borrowing plans. Thereafter the company will revert to its policy of distributing $10 million a year.

 

“Is this question part of your assignment? We Can Help!”

 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"