1. Suppose the price of CANNIBAL WEED (CW) Inc. closes at $69 on October 16, 2018...
Homework Answers
(a) Expected price = Ex dividend price = Pre dividend price - dividend = 69 - 3 = $ 66
(b) P0 = Buy price = 69; Dividend, D = 3; Sale Price, P1 = 66; Hence the return = (P1 + D - P0) / P0 = (66 + 3 - 69) / 69 = 0%
Thus in the ideal scenario, dividend doesn't bring any additional value for the shareholders. The price of the stock falls to the extent of dividend distributed to remove any abnormality or arbitrage in the market.
(c) Price should have been $ 66 on account of dividend distribution as calculated in part (a). Since legalization of cannabis is expected to work in favor of CW, the stock price should have increased. Hence, the price should have been definitely $ 66 or more. However it opened at a lower price. This simply implies the lack of strong or even semi strong form of efficiency. At the best we can say that market has a weak for of efficiency.
Add Answer to:
1. Suppose the price of CANNIBAL WEED (CW) Inc. closes at $69
on October 16, 2018...
COURCES Exercise 14-5 (Part Level Submission) On October 1, Little Bobby Corporation's stockholders' equity is as...
COURCES Exercise 14-5 (Part Level Submission) On October 1, Little Bobby Corporation's stockholders' equity is as follows. Common stock, $5 par value $383,500 Paid-in capital in excess of par-common stock 25,000 Retained earnings 169,000 Total stockholders' equity $577,500 Part On October 1, Little Bobby declares and distributes a 10% stock dividend when the market price of the stock is $14 per share. (a) Study Your answer is correct. Compute the par value per share (1) before the stock dividend and...
just Excrcise 16: Relation of rights to EPS and the price-carnings ratio Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of Walker common stock is S82 p...
just
Excrcise 16: Relation of rights to EPS and the price-carnings ratio Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of Walker common stock is S82 per share rights-on. The company's net income this year is $25 million. A rights offering has been announced in which 700,000 new shares will be sold at $76.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What...
On May 1, 2018, Delta Airlines buys 100 SkyFlight Food Service, Inc. bonds for $1,015 each....
On May 1, 2018, Delta Airlines buys 100 SkyFlight Food Service, Inc. bonds for $1,015 each. Delta classifies this investment as available for sale. This is the first available for sale investment Delta has recorded and the only itemthat affects comprehensive income during this time period. During 2018, SkyFlight pays all bondholders $42 interest per bond. At the end of 2018, the bonds of Skyflight are trading for $1,020 each. During 2019, Skyflight pays all bondholders interest of $75 per...
Delta borrowed $1,400 in the form of a 6-month, zero-interest-bearing note on October 1, 2020 and...
Delta borrowed $1,400 in the form of a 6-month, zero-interest-bearing note on October 1, 2020 and is required to pay $1,440 on March 1, 2021. (show calculations) 16) What amount does Delta record as the note payable on October 1, 2020? 17) How much interest expense does Delta recognize on its income statement for 2020? 18)Gamma receives interest on a $900, 8%, 5-year note receivable each April 1. At December 31, 2017, the appropriate adjusting entry was made to accrue...
(b) Suppose a Spanish investor is considering the following investments: Investment A: This is the ordinary...
(b) Suppose a Spanish investor is considering the following investments: Investment A: This is the ordinary share of a matured company. The market price for this security is €40 per share. The company is expected to pay €4 dividend per share one year from now and its expected growth rate for foreseeable future is 4%. Investment B: This is the ordinary share of a fast-growing company. The market price for this security is €40 per share. The company expects to...
The Tusquittee Company is a retail company that began operations on October 1, 2018, when it...
The Tusquittee Company is a retail company that began operations on October 1, 2018, when it incorporated in the state of North Carolina. The Tusquittee Company is authorized to issue 100,000 shares of $1 par value common stock and 50,000 shares of 5%, $50 par value preferred stock. The company sells a product that includes a one-year warranty and records estimated warranty payable each month. Customers are charged a 6% state sales tax. The company uses a perpetual inventory system....
Intermediate Accounting II Homework Problems Chapter 16 1. The stockholders’ equity section of Whaler Inc. at...
Intermediate Accounting II Homework Problems Chapter 16 1. The stockholders’ equity section of Whaler Inc. at the beginning of the current year appears below. Common stock, $1 par value, authorized 5,000,000 shares, 800,000 shares issued and outstanding $ 800,000 Paid-in capital in excess of par—common stock 16,100,000 Retained earnings 260,000 During the current year, the following transactions occurred: a. The company issued to the stockholders 500,000 rights. Ten rights are needed to buy one share of stock at $21. The...
Exercise 16-23 On June 1, 2018, Martinez Company and Sandhill Company merged to form Teal Inc....
Exercise 16-23
On June 1, 2018, Martinez Company and Sandhill Company merged to
form Teal Inc. A total of 733,000 shares were issued to complete
the merger. The new corporation reports on a calendar-year
basis.
On April 1, 2020, the company issued an additional 577,000 shares
of stock for cash. All 1,310,000 shares were outstanding on
December 31, 2020.
Teal Inc. also issued $600,000 of 20-year, 8% convertible bonds at
par on July 1, 2020. Each $1,000 bond converts to...
Exercise 16-23 On June 1, 2018, Grouper Company and Monty Company merged to form Flounder Inc....
Exercise 16-23 On June 1, 2018, Grouper Company and Monty Company merged to form Flounder Inc. A total of 846,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2020, the company issued an additional 625,000 shares of stock for cash. All 1,471,000 shares were outstanding on December 31, 2020. Flounder Inc. also issued $600,000 of 20-year, 9% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to...
Exercise 16-23 On June 1, 2018, Crane Company and Cheyenne Company merged to form Ayayai Inc....
Exercise 16-23
On June 1, 2018, Crane Company and Cheyenne Company merged to
form Ayayai Inc. A total of 870,000 shares were issued to complete
the merger. The new corporation reports on a calendar-year
basis.
On April 1, 2020, the company issued an additional 543,000 shares
of stock for cash. All 1,413,000 shares were outstanding on
December 31, 2020.
Ayayai Inc. also issued $600,000 of 20-year, 8% convertible bonds
at par on July 1, 2020. Each $1,000 bond converts to...
COURCES Exercise 14-5 (Part Level Submission) On October 1, Little Bobby Corporation's stockholders' equity is as follows. Common stock, $5 par value $383,500 Paid-in capital in excess of par-common stock 25,000 Retained earnings 169,000 Total stockholders' equity $577,500 Part On October 1, Little Bobby declares and distributes a 10% stock dividend when the market price of the stock is $14 per share. (a) Study Your answer is correct. Compute the par value per share (1) before the stock dividend and...
just
Excrcise 16: Relation of rights to EPS and the price-carnings ratio Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of Walker common stock is S82 per share rights-on. The company's net income this year is $25 million. A rights offering has been announced in which 700,000 new shares will be sold at $76.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What...
(b) Suppose a Spanish investor is considering the following investments: Investment A: This is the ordinary share of a matured company. The market price for this security is €40 per share. The company is expected to pay €4 dividend per share one year from now and its expected growth rate for foreseeable future is 4%. Investment B: This is the ordinary share of a fast-growing company. The market price for this security is €40 per share. The company expects to...
The Tusquittee Company is a retail company that began operations on October 1, 2018, when it incorporated in the state of North Carolina. The Tusquittee Company is authorized to issue 100,000 shares of $1 par value common stock and 50,000 shares of 5%, $50 par value preferred stock. The company sells a product that includes a one-year warranty and records estimated warranty payable each month. Customers are charged a 6% state sales tax. The company uses a perpetual inventory system....
Exercise 16-23
On June 1, 2018, Martinez Company and Sandhill Company merged to
form Teal Inc. A total of 733,000 shares were issued to complete
the merger. The new corporation reports on a calendar-year
basis.
On April 1, 2020, the company issued an additional 577,000 shares
of stock for cash. All 1,310,000 shares were outstanding on
December 31, 2020.
Teal Inc. also issued $600,000 of 20-year, 8% convertible bonds at
par on July 1, 2020. Each $1,000 bond converts to...
Exercise 16-23 On June 1, 2018, Grouper Company and Monty Company merged to form Flounder Inc. A total of 846,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2020, the company issued an additional 625,000 shares of stock for cash. All 1,471,000 shares were outstanding on December 31, 2020. Flounder Inc. also issued $600,000 of 20-year, 9% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to...
Exercise 16-23
On June 1, 2018, Crane Company and Cheyenne Company merged to
form Ayayai Inc. A total of 870,000 shares were issued to complete
the merger. The new corporation reports on a calendar-year
basis.
On April 1, 2020, the company issued an additional 543,000 shares
of stock for cash. All 1,413,000 shares were outstanding on
December 31, 2020.
Ayayai Inc. also issued $600,000 of 20-year, 8% convertible bonds
at par on July 1, 2020. Each $1,000 bond converts to...
Most questions answered within 3 hours.
-
A failure of an engine control unit causes it to fail an average
of 0.1 times...
asked 8 minutes ago -
A siren on an emergency car moving with velocity 90 km/hour
produces the sound with frequency...
asked 9 minutes ago -
Consider the schema below that models a bank’s branches,
customers and their accounts and loans. Provide...
asked 16 minutes ago -
What kinds of policies should be considered when individuals
decisions may likely impact public expense? For...
asked 24 minutes ago -
The financial statements of Apple Inc. show the following
numbers for fiscal year 2017 ($000,000):
Revenue...
asked 30 minutes ago -
Suppose that you are given the following results. Find the
correlation coefficient of the data.
sx...
asked 39 minutes ago -
The width of a tool used for semiconductor manufacturing
is assumed to be normally distributed with...
asked 41 minutes ago -
A
runaway train car that has a mass of 1,400 kg travels at a speed of...
asked 45 minutes ago -
The expected abnormal earnings of a firm that has earnings of
$40,000 with a required equity...
asked 43 minutes ago -
A spherical surface completely surrounds a collection of
charges. Find the electric flux through the surface...
asked 59 minutes ago -
Two capacitors with capacitances of 12 and 18.1 µF,
respectively, are connected in parallel. The system...
asked 45 minutes ago -
Let's say you are a small business owner that provides
business-to-business software-as-a-service to non-profit
organizations. Your...
asked 50 minutes ago