Han Manufacturing Company has the stockholders’ equity account shown below. The firm’s common stock currently sells for $50 per share.

Preferred stock $ 1,250,000

Common stock (5,000,000 shares @ $1 par) 5,000,000

Paid-in capital in excess of par 20,000,000

Retained earnings 30,000,000

Total stockholders’ equity $56,250,000

a. What is the maximum dividend per share that Han Manufacturing can pay? (Assume legal capital includes par value and paid-in capital.)

b. Recast the stockholders’ equity accounts to show independently:

1. A 2 for 1 common stock split.

2. A cash dividend of $3.50 per share.

3. A stock dividend of 10% on the common stock.

c. At what price would you expect the Han Manufacturing stock to sell after:

1. The stock split?

2. The stock dividend?

Answer rating: 100% (QA)

Solution Computation of the following a Maximum dividend per share Legal ca... View the full answer