Question

# The balance sheet for Ferguson Corp. is shown here in market value terms. There are 6,000...

 The balance sheet for Ferguson Corp. is shown here in market value terms. There are 6,000 shares of stock outstanding.

 Market Value Balance Sheet Cash \$ 44,900 Equity \$ 474,900 Fixed assets 430,000 Total \$ 474,900 Total \$ 474,900

 The company has declared a dividend of \$1.80 per share. The stock goes ex dividend tomorrow.
 Ignoring any 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.)

 Stock price \$  per share

 Ignoring any tax effects, what will it sell for tomorrow? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

 Stock price \$  per share

 Ignoring any tax effects, what will the balance sheet look like after the dividends are paid? (Do not round intermediate calculations.)

 Balance Sheet Cash \$ Equity \$ Fixed assets Total \$ Total \$

#### Homework Answers

Answer #1

a). P0 = total market value of equity / shares outstanding

= \$474,900 / 6,000 = \$79.15

b). Px = stock price - amount of the dividend

= \$79.15 - \$1.80 = \$77.35

c). Total Dividend Paid = Dividends Paid x No. of Outstanding Shares = \$1.80 x 6,000 = \$10,800

The equity and cash accounts will both decline by \$10,800.

 Balance Sheet Cash \$ 34,100 Equity \$ 464,100 Fixed assets 430,000 Total \$ 464,100 Total \$ 464,100
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