Dividend All Corp. has the following market value balance sheet;

Cash 25,000,000

Assets 115,000,000

Total Assets 140,000,000

Debt 40,000,000

Equity 100,000,000

Total Liability and Equity 140,000,000

Is has 2 million outstanding shares. Jack Doe owns 100 shares of Dividend All Corp. Assume no taxes. Show the impact (1) on the balance sheet and (2) Jack Doe portfolio (cash level, number of share, shares value) of the following (four events):

a. An $10 million dividend.

b. An $10 million share buyback.

c. A 10% stock split.

d. A five for one (=one to five) stock split.

e. Assume the original balance sheet. How can Jack Doe create his $500 homemade dividend?

f. Assuming no transaction cost determine Jack Doe preferences between (a) and (b):

1. Dividends are taxed as regular income, while capital gains are taxed at 15% only.

2. Dividends and capital gains are taxed at the same 15% reduced tax rate.

Answer rating: 100% (QA)

a Impact on Balance Sheet Cash 25000000 10000000 15000000 Equity 100000000 10000000 90000000 Total L... View the full answer