1) ABC Company has $1 million in excess cash it desires to return to stockholders. Selected financial information is given below.
If ABC selects to give out the cash through the stock repurchase and price earnings ratio does not change through transaction, what will stock's market price be after shares are obtained?
Earnings after taxes $2,500,000
Shares of stock outstanding 1,000,000
Price-earnings ratio 10
Market price of Gallagher's stock $25
2) Sunshine Services, Inc., has just declared 2-for-1 stock split. Company’s pre-split common stockholders’ equity was given:
If pre-split price of common stock was= $28.50, what will new common equity section of balance sheet look like?
Par Price
Common stock (1,000,000 shares, $2.50 par)
Paid in excess
Retained earnings
Total common
stockholders’ equity
Book value per share: