Question

The balance sheet for Sinking Ship Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. Market Value Balance Sheet $ 44,800 Equity 420,000 Cash Fixed assets $464,800 Total $464,800 Total 464,800 The company has declared a dividend of $1.70 per share. The stock goes ex dividend tomorrow Ignoring any tax effects, what is the stock selling for today? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock price per share Ignoring any tax effects, what will it sell for tomorrow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock price per share

Answer 1

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Equity		464800
Shares Outstanding		5000
Stock Price today	(464800/5000)	92.96

Ignoring tax effects, the stock price will drop by the amount of the dividend, so:

Stock Price Tomorrow

(92.96-1.7)

91.26

Balance Sheet After Paying Dividends:

Balance Sheet
Cash	36300	Equity	456300
Fixed Assets	420000
	456300		456300

Equity and cash accounts will both decline by 8500.

Dividends Paid = 5000*1.7 =8500