Question

The balance sheet for Ferguson Corp. is shown here in market value terms. There are 10,000 shares of stock outstanding.

  

Market Value Balance Sheet
Cash	$	45,400		Equity	$	525,400
Fixed assets		480,000
Total	$	525,400		Total	$	525,400

  

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. 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. Round your answer to 2 decimal places, e.g., 32.16.)

  

Stock price

$  per share

  

Ignoring any tax effects, what will the balance sheet look like after the dividends are paid? (Do not round intermediate calculations.)

Balance Sheet
Cash	$			Equity	$
Fixed assets
Total	$			Total	$

Answer 1

1) Calculation of stock price today :

Current stock price = Current net worth of the company / Number of shares outstanding

= $525,400 / 10,000

= $52.54

2) Calculation of tomorrow's stock price :

Stock price = Stock price before dividend - Dividend paid

= $52.54 - $1.70

= $50.84

3) Preparation of balance sheet after paying dividends :

Assets	Amount($)	Liabiities	Amount($)
Cash	28,400	Equity	508,400
Fixed assets	480,000
Total	508,400	Total	508,400