Investor Sarah Warren currently holds 400 shares of Nutri-Foods. The firm has 40,000 shares outstanding. The firm most recently had earnings available for common stockholders of $80,000, and its stock has been selling for $22 per share. The firm intends to retain its earnings and pay a 10% stock dividend. A. How much does the firm currently earn per share? B. What proportion of the firm does Sarah currently own? C. What proportion of the firm will Sarah own after the stock dividend? Explain your answer.

Investor Sarah Warren currently holds 400 shares of Nutri-Foods. The firm has 40,000 shares outstanding. The firm most recently had earnings available for common stockholders of $80,000, and its stock has been selling for $22 per share. The firm intends to retain its earnings and pay a 10% stock dividend. A. How much does the firm currently earn per share? B. What proportion of the firm does Sarah currently own? C. What proportion of the firm will Sarah own after the stock dividend? Explain your answer.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 11P

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