Question

The balance sheet for Throwing Copper, Inc., is shown here in market value terms. There are 34,000 shares of stock outstanding.

Market Value Balance Sheet
Cash	$	163,000
Fixed assets		678,500		Equity	$	841,500
Total	$	841,500		Total	$	841,500

The company has declared a dividend of $1.10 per share. The stock goes ex dividend tomorrow. Ignore all tax effects.

What is the stock selling for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock price            $

What will it sell for tomorrow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock price            $

What will the balance sheet look like after the dividends are paid? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

Cash	$
Fixed assets		Equity	$
Total	$	Total	$

Answer 1

Ans. Calculation of stock price before Ex- dividend

Step 1: Calculation of Net Assets value

Total Net assets = 841500

Total no share = 34000

Share price today (841500/34000) = 24.75

2. Calculation of share after dividend declare and paid

Total Net assets value before dividend = 841500

Less: (34000X1.10) = (37400)

Net assets after dividend paid = 804100

Share price after ex-dividend = 804100/34000 = $23.65

3. Balance Sheet after the dividend is paid

Cash (163000-37400) $ 125600 Equity (841500-37400) $ 804100

Fixed Assets $ 678500

$ 804100 $ 804100