9. A corporation has $500,000 excess cash to distribute. The share price is $200

Question

9. A corporation has $500,000 excess cash to distribute. The share price is $200 and the firm has 600,000 shares outstanding. Select the correct statement.

a.    The corporation could repurchase 2,400 shares.

b. The corporation could pay a $1.20 per share cash dividend.

c. The corporation could repurchase 2,500 shares.

d. The corporation could pay a $2.50 per share dividend.

10. A publicly traded corporation issues additional shares of new common stock. This is referred to as

a. venture capital.

b. an initial public offering (IPO).

c. a perpetuity.

d. a seasoned issue

Explanation / Answer

9) Excess cash to distribute = $500,000,

    Share price = $200

    The repurchased shares = $500,000/$200 = 2,500 shares

    So ans is option C - The corporation could repurchase 2,500 shares.

10) Ans is option is b - an initial public offering(IPO)

      Initial public offering is basically the public offering of shares . The sale is made to retail investors, institutional investors etc.

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