Go back to the first Hewlard Pocket balance sheet. Pocket needs to hold on to $50,000 of

Question:

Go back to the first Hewlard Pocket balance sheet. Pocket needs to hold on to $50,000 of cash for a future investment. Nevertheless it decides to pay a cash dividend of $2 per share, and to replace the cash with a new issue of shares. After the dividend is paid and the new stock is issued:

a. What will be the price per share?

b. What will be the total value of the company?

c. What will be the total value of the stock held by new investors?

d. What will be the wealth of the existing investors including the dividend payment?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...