Assets Liabilities and Shareholders' Equity A. Original balance sheet $ 150,000 Debt 950,000 Equity $1,100,000 Value of firm Cash 1,100,000 $1,100,000 Other assets Value of firm Shares outstanding = 100,000 Price per share = $1,100,000 / 100,000 = $11 Pocket needs to hold on to $52,000 of cash for a future investment. Nevertheless, it decides to pay a cash dividend of $2.1O and to replace cash as needed with a new issue of shares. After the dividend is paid and the new stock is issued: a. What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the total value of the company? (Enter your answers in whole dollars, not in millions.) c. What will be the total value of the stock held by new investors? (Enter your answers in whole dollars, not in millions. Do intermediate calculations. Round your answer to the nearest whole dollar amount.) d. What will be the wealth of the existing investors including the dividend payment? (Enter your answers in whole dollars, n millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Answer is complete but not entirely correct. a. Price 8.90 per share Total value of the company Total value of the stock held by new investors b. $ 1,002,000 C. 112,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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just need last part

Assets
Liabilities and Shareholders' Equity
A. Original balance sheet
150,000
950,000 Equity
$1,100,000 Value of firm
Cash
Debt
Other assets
1,100,000
Value of firm
$1,100,000
Shares outstanding = 100,000
Price per share = $1,100,000 / 100,000 = $1
Pocket needs to hold on to $52,000 of cash for a future investment. Nevertheless, it decides to pay a cash dividend of $2.10 per share
and to replace cash as needed with a new issue of shares. After the dividend is paid and the new stock is issued:
a. What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What will be the total value of the company? (Enter your answers in whole dollars, not in millions.)
c. What will be the total value of the stock held by new investors? (Enter your answers in whole dollars, not in millions. Do not round
intermediate calculations. Round your answer to the nearest whole dollar amount.)
d. What will be the wealth of the existing investors including the dividend payment? (Enter your answers in whole dollars, not in
millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
Answer is complete but not entirely correct.
Price
$
8.90
per share
а.
b.
Total value of the company
$
1,002,000 O
Total value of the stock held by new investors
$
112,000
c.
d.
Existing shareholder wealth
1,119,406
Transcribed Image Text:Assets Liabilities and Shareholders' Equity A. Original balance sheet 150,000 950,000 Equity $1,100,000 Value of firm Cash Debt Other assets 1,100,000 Value of firm $1,100,000 Shares outstanding = 100,000 Price per share = $1,100,000 / 100,000 = $1 Pocket needs to hold on to $52,000 of cash for a future investment. Nevertheless, it decides to pay a cash dividend of $2.10 per share and to replace cash as needed with a new issue of shares. After the dividend is paid and the new stock is issued: a. What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the total value of the company? (Enter your answers in whole dollars, not in millions.) c. What will be the total value of the stock held by new investors? (Enter your answers in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) d. What will be the wealth of the existing investors including the dividend payment? (Enter your answers in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Answer is complete but not entirely correct. Price $ 8.90 per share а. b. Total value of the company $ 1,002,000 O Total value of the stock held by new investors $ 112,000 c. d. Existing shareholder wealth 1,119,406
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