Question

The balance sheet for Fourth Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. Market Value Balance Sheet Cash $ 43,800 Equity $ 363,800 Fixed assets 320,000 Total $ 363,800 Total $ 363,800 The company has declared a dividend of $1.50 per share. The stock goes ex-dividend tomorrow. Ignoring any 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.) Ignoring any tax effects, what will it sell for tomorrow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Ignoring any tax effects, 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.)

Answer 1

Stock price today	Value of equity/No of shares outstanding
Stock price today	363800/5000
Stock price today	$72.76
Calculation of stock price tomorrow
Stock price tomorrow	Stock price today - Dividend paid
Stock price tomorrow	72.76-1.50
Stock price tomorrow	$71.26
Total amount of dividend paid	1.50*5000
Total amount of dividend paid	$7,500
Balance sheet after dividend are paid would decrease cash and market value of equity
Market value balance sheet
Cash (43800-7500)	$36,300	Equity (71.26*5000)	$356,300
Fixed assets	$320,000
Total	$356,300	Total	$356,300