Larsons Inc. shows the following capital accounts before a 10% stock dividend. Common stock (2,000,000 shares @ $5 par) Capital in excess of par Retained earnings Net Worth $10,000,000 $ 6,000,000 $24,000,000 $40,000,000 The firm's shares have a market price of $20. Address the following: A. Show the revised capital accounts after the 10% stock dividend. B. Show the value to the investor with and without the stock dividend assuming an aftertax earnings of $13.2 million and the stock is selling at 20 times PE ratio.
Larsons Inc. shows the following capital accounts before a 10% stock dividend. Common stock (2,000,000 shares @ $5 par) Capital in excess of par Retained earnings Net Worth $10,000,000 $ 6,000,000 $24,000,000 $40,000,000 The firm's shares have a market price of $20. Address the following: A. Show the revised capital accounts after the 10% stock dividend. B. Show the value to the investor with and without the stock dividend assuming an aftertax earnings of $13.2 million and the stock is selling at 20 times PE ratio.
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 11P
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