Question

Stock dividend investor Personal Finance Problem Security Dala Company has outstanding 40.000 shares of common stock currently selling a $45 per shore The firm most recently had earnings available for common stockholders of $142 000 but it has decided to retain these funds and is considering a 15% stock dividend in leu of a cash dividend #Determine the firm's current ears per share b. If Sam Water currently owns 600 shares of the firm's stock determine his proportion of ownership currently and under the proposed 15% stock dividend plan . Calculate the market price per share under the 15% stock dividend plan d. For the proposed 15% stock dividend plan calculate the a ngs per share after payment of the stock dividend e. What is the value of Sam's holdings under the 15 stock didend plan? Should Sam have any preference with respect to the proposed stock dividend? The tem's current earnings per share is (Round to the newest cent) b. Sam currently owns 600 swees of the firm's stock the proportion of the firm Sam currenty w Round to two decimal places) The proportion of the firm Sam wil own after the 15% stock dividend is (Round to two decimal places) c. If Security pays a 15% stock dividend, the market price of stock after the dividend is found to the recent) d. The firm's earnings per share after payment of the stock dividend is (Round to the nearest cant) • The value of Sam's holdings before the stock dividend is Round to the nearest dollar) The value of Sam's holdings after the stock dividends (Round to the nearest dolar) Should Sam have any preference with respect to the proposed stock dividend plan? (Select the best answer below OA Sam should have no preference because he total value will reman essentially the same OB. Sam should prefer a 15% stock dividend because his tal value will be significantly more OC. Sam should prefer a 15% stock dividend because he will have more shares Click to select your answers).

Answer 1

Attached is the answer-

a. Current EPS $3.55

b. Ownership pre and post dividend 1.5%
c. Market price per share $39.13

d. New EPS $3.09

Monte No of shares - 40000 , Market Price $45 Sarnings - $ 192,000 stock div. = 15% - 900ook is: 60oo. ay Current EPS = Earnings No. of shares $742,000 3.55 40000 by Sam owns - 6oo. Proportion of firm equity 2 600/40000 3 1.50% Peop? of ownership post dividend soot 15% 40000 +15% 490/4.000 2 1.50% a Total Market value - 40000 a $45 - $1,800,000 No. of share post div. = 40000 & 15% 2 46000 i'. New MPS = $1,800,000 46000 = = *59.13. ay New Caming Per shale - Earnings - New no. of shares $ 142,000 46000 - $3.09. I ENIS0000USD THEORGE DU DOGODSD