QUES 6 The balance sheet for Pie Crust, Inc., is shown here in market value term

Question

QUES 6

The balance sheet for Pie Crust, Inc., is shown here in market value terms. There are 25,000 shares of stock outstanding. The company has declared a dividend of $1.00 per share. The stock goes ex-dividend tomorrow. Ignore all 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).) What will it sell for tomorrow? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) What will the balance sheet look like after the dividends are paid?

Explanation / Answer

The share price the total market value of equity divided by the shares outstanding:

If there is no tax effect, the share price will drop by the amount of the dividend:
Price after dividend = $29.52 - $1.00 = $28.52

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