E14-1. Stephanie\'s Cafes, Inc. has declared a dividend of $1.30 per share for s
ID: 2697631 • Letter: E
Question
E14-1. Stephanie's Cafes, Inc. has declared a dividend of $1.30 per share for shareholders of record on Tuesday, May 2. The firm has 200,000 shares outstanding and will pay the dividend on May 24. How much cash will be needed to pay the dividend? When will the stock begin selling ex dividend?<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
E14-5. The current stockholders' equity account for Hilo Farms is as follows:
Common stock (50,000 shares at $3 par) $150,000
Paid in capital in excess of par 250,000
Retained earnings 450,000
Total stockholders' equity $850,000
Hilo has announced plans to issue an additional 5,000 shares of common stock as part of its stock dividend plan. The current market price of Hilo's common stock is $20 per share. Show how the proposed stock dividend would affect the stockholder's equity account.
Explanation / Answer
E-14,
200000*1.3 = $260000 (cash is needed) on may 12
E-14.5
hilo will issue share and its present common stock will dilute
50000*20 = 55000*x
x = 50000*20/55000 = $18.18 (new stock market price)
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