At the end of 20X6, Home Ltd. reported the following in shareholders’ equity: Common shares, no-par...
At the end of 20X6, Home Ltd. reported the following in
shareholders’ equity:
| Common shares, no-par value; authorized, unlimited shares; issued, 14,650,000 shares | $ | 19,125,000 | |
| Retained earnings | 53,080,000 | ||
| $ | 72,205,000 | ||
At this time, the shares were trading in the range of $2 to $4 per
share on public stock markets. The company’s board of directors is
contemplating two alternative courses of action:
- Declaring a 50% stock dividend, or
- Executing a 3-for-2 stock split.
Required:
1. Prepare the shareholders’ equity section for each alternative,
assuming that market value is used to capitalize the stock
dividend.
2. What would the expected share price be assuming a share price of
$4 for alternative 1 and a share price of $6 for alternative 2?
(Round your answers to 2 decimal places.)
Case A
Case B
3-a. Which alternative would shareholders prefer?
4. Which alternative would the company prefer?
Homework Answers
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At the end of 20X6, Home Ltd. reported the following in
shareholders’ equity:
Common shares, no-par...
1 10.00 points 7· At the end of 20X6, Home Ltd. reported the following in shareholders'...
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