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Husky Inc. has just issued a 3% share dividend to all its common shareholders. The all-equity...

Husky Inc. has just issued a 3% share dividend to all its common shareholders. The all-equity company with market value of $20 million has stock that is currently priced at $20 per share and earnings per share of $1.00. You are a 10% shareholder in the company. Answer the following questions. SHOW YOUR CALCULATIONS.

  1. What is Husky Inc.’s outstanding number of share before and after the dividend?
  2. What is the company’s earnings per share after the dividend? (1 mark)
  3. What is the new stock price? (1 mark)
  4. What is Husky Inc.’s total market value after the dividend?
  5. How many shares do you own before and after the dividend?
  6. What is the value of your ownership before and after the dividend?
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Answer #1

a.Outstanding shares before dividend = Market Value/Price per share

= 20,000,000/20

= 1,000,000 shares

After dividend = 1,000,000*1.03 = 1,030,000 shares

b.Earnings per share = Total earnings/Number of shares

= 1,000,000*1/1,030,000

= $0.97087 per share

c.P/E ratio = 20/1 = 20

New Stock price = 0.97087*20 = $19.4175

d.Total market value = 19.4175*1030,000

= 20,000,025 or 20,000,000 (approx.)

e.Before dividend = 1,000,000*10% = 100,000

After = 1,030,000*10% = 103,000

f. value = 100,000*20 = 2,000,000

After = 103,000*19.4175 = $2,00,002.5 or 2,000,000(approx.)

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