Q1) Sarah Warren at present holds 400s shares of Nutri-Foods. Firm has 40,000 shares outstanding. Firm most just had earnings available for common stockholders of $80,000, and its stock has been selling for $22 per share. Firm intends to retain its earnings and pay 10% stock dividend.
a) How much does firm presently earn per share?
b) What proportion of firm does Warren presently own?
c) What proportion of firm will Warren own after stock dividend?
d) At what market price would you expect stock to see after stock dividend? Describe the answer
e) Describe what effect, if any, payment of stock dividends will have on Warren's share of ownership and earnings of Nutri-Foods.