Using the money from their recent bond issue, Terry’s management has decided to declare an additional...
Using the money from their recent bond issue, Terry’s management has decided to declare an additional $562,500 dividend. The date of declaration is December 30, Year 3. The date of record will be January 15, Year 4, and the date of payment will be January 30, Year 4.
As an additional signal to the market, Terry’s management repurchased 205,000 shares of Terry’s common stock on December 15, Year 3 for $8.00 a share.
At the beginning of Year 2, Terry’s Board of Directors authorized stock options for the executive team. The team could buy shares from the company at a set price for $10.00/share, then sell them at the current market price to make a bonus. On December 10th, Terry’s stock price was only $8.40/share, making these stock options worthless. Based on this information, do you think that the management teams’ decision to authorize an additional dividend and repurchase shares on December 15th was ethical? Why or why not?
Homework Answers
The Management's Decision to Authorize dividend and repurchase shares on December 15th was not ethical.
Let's say as on December 15, Year 3 outstanding shares were 500000 Lacs having face value of $10
As the share price on Dec 10th is $8.40 per share the financial health of the company must be not so good. With Declare of dividend it will boost the share price but will hamper the financial health of the company. Similarly, with buy back the price of share will increase ,but results in outflow of funds and working capital of the company.
As the executive team was having the stock options, and they can buy shares from the company at set price of $10/ share, the market price should be above $10 to make the option beneficial for the executive team.
The declaration of dividend and buy back of shares was a step just to make profits for the executive team and was unethical in respect of company as well as the Shareholders of the company
Add Answer to:
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional...
Using the money from their recent bond issue, Terry’s management has decided to declare an additional...
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share.
Terry’s management would like to know the...
Information: Using the money from their recent bond issue, Terry’s management has decided to declare an...
Information:
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share. Tax rate is 25%...
Information: Using the money from their recent bond issue, Terry’s management has decided to declare an...
Information: Using the money from their recent bond issue, Terry’s management has decided to declare an additional $562,500 dividend. The date of declaration is December 30, Year 3. The date of record will be January 15, Year 4, and the date of payment will be January 30, Year 4. As an additional signal to the market, Terry’s management repurchased 205,000 shares of Terry’s common stock on December 15, Year 3 for $8.00 a share. Terry’s management would like to know...
Using the money from their recent bond issue, Terry’s management has decided to declare an additional...
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share.
Terry’s management would like to know the...
**** ONLY NEED QUESTION 5 & 6 **** Information: Using the money from their recent bond...
**** ONLY NEED QUESTION 5 & 6 **** Information: Using the money from their recent bond issue, Terry’s management has decided to declare an additional $562,500 dividend. The date of declaration is December 30, Year 3. The date of record will be January 15, Year 4, and the date of payment will be January 30, Year 4. As an additional signal to the market, Terry’s management repurchased 205,000 shares of Terry’s common stock on December 15, Year 3 for $8.00...
Management has decided to declare an additional $562,500 dividend, the date of declaration is December 30,...
Management has decided to declare an additional $562,500
dividend, the date of declaration is December 30, Year 3. The date
of record will be January 15, Year 4. and the date of payment will
be January 30, Year 4. Create journal entries and make any
necessary changes to the financial statements.
Balance Sheet Statement of Cash HoLS As of1251ear3 For Year Ended 1251Year3 Cash Howfrom Operations Net moome 37,087,771 CurentAsses (51,665,I0) 51,332,0O0 *199,500 (*166,500) 55,554,96953,330,0CO GhangeinAR 55,994,000 55,661,000Chage in Ienry...
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of common stock and 34,000 shares of 8%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a
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On February 28, 2018, Dow sold 57,000 common shares. In keeping
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Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share.
Terry’s management would like to know the...
Information:
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share. Tax rate is 25%...
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share.
Terry’s management would like to know the...
Management has decided to declare an additional $562,500
dividend, the date of declaration is December 30, Year 3. The date
of record will be January 15, Year 4. and the date of payment will
be January 30, Year 4. Create journal entries and make any
necessary changes to the financial statements.
Balance Sheet Statement of Cash HoLS As of1251ear3 For Year Ended 1251Year3 Cash Howfrom Operations Net moome 37,087,771 CurentAsses (51,665,I0) 51,332,0O0 *199,500 (*166,500) 55,554,96953,330,0CO GhangeinAR 55,994,000 55,661,000Chage in Ienry...
Check my work 3 On December 31, 2017, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8% noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December 15, 2018 33.34 oints On February 28, 2018, Dow sold 60,000 common shares. Also, as a part of a 2017 agreement for the acquisition of...
Problem 19-12 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options (LO19-4, 19-5, 19-6, 19-7, 19-8, 19-10] On December 31, 2017, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December 15, 2018. On February 28, 2018, Dow sold 60,000 common...
On December 31, 2017, Dow Steel Corporation had 640,000 shares
of common stock and 34,000 shares of 8%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a
4% common stock dividend on May 15 and paid cash dividends of
$440,000 and $73,000 to common and preferred shareholders,
respectively, on December 15, 2018.
On February 28, 2018, Dow sold 57,000 common shares. In keeping
with its long-term share repurchase plan, 6,000 shares were retired
on July 1. Dow's net income...
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