Uptown Interior design has the same market value as the book value of its balanc
ID: 2733538 • Letter: U
Question
Uptown Interior design has the same market value as the book value of its balance sheet accounts. The firm has declared a dividend of $0.35 per share that will be paid in two days time. The company has 8,000 shares of stock outstanding trading in the market. The balance sheet is presented in the following table:
Balance Sheet
Cash
25,000
Equity
190,000
Fixed Assets
165,000
Total
190,000
Total
190,000
a) Ignoring taxes, what is the stock selling for today? 23.75 already answered
b) What will it sell in two days time after the ex dividend date? 23.4 already asnwered
c) What are the accounts affected after the dividends are paid and what will be their new balance? Equity 187200 Cash 22500 already answered need help with question below
Uptown Interiors has decided to consider an alternative to cash dividend. Instead of paying a dividend, the firm will repurchase $5 200 worth of stock.
a) What effect will this transaction have on the equity of the firm?
b) How many shares were repurchased? (round your answer)
c) How many shares will be outstanding?
d) What is the new equity value?
e) What will the price per share be after the repurchase?
I have the first question already answered. The current price of the stock is 23.75, and after the ex dividend it will be priced at 23.4 and the equity account will be 187200 and the cash account will be 22500. I need help with the second question and they questions go together so I wasnt sure if the information for the first question would be needed for answer the second. Thank you for your help
Balance Sheet
Cash
25,000
Equity
190,000
Fixed Assets
165,000
Total
190,000
Total
190,000
Explanation / Answer
a)stock selling today= 190,000/8000=$23.75
b)ex dividend=23.75-.35=$23.4
c)total dividend paid= (0.35*8000)=2800
cash (db) 25000-2800=$22200 and equity= 190,000-2800=$187,200
Since they are going to repurchase $5200 worth of stock the equity will decrease as tresury stock
a)equity will decrease by $5200
b)shares repurchased=5200/23.75=219 shares
c)shares outstanding= 8000-219=7781 shares
d)new equity value=190,000-(5200)=$184,800
e)price per share after repurchase=184,800/7781=$23.75
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