1. A firm is all equity financed, with 10,000 outstanding shares with a market value of $20 each. Its net income was $30,000, and it decides to pay a cash dividend of $2,000. Calculate the value of each share after the dividend payout.
A $22.8
B $20.0
C $19.8
D Not enough information
2. The owners of a firm facing a high probability of bankruptcy prefer to invest in ____ projects, because ______.
A safer; riskier projects make bankruptcy more likely
B no new; the firm is likely to go bankrupt anyway
C risky; the shareholders have little to lose and might win if successful
D risky; creditors prefer taking a gamble rather than having the company default