Question 4-21

Green Co. announces a 3:1 stock split. Share price is $240, number of shares outstanding is 2,400,000, dividend is $4.20, EPS is $5.40.What will be the new DPS? What is the new market value?

$1.40/$192,000,000

$1.40/$576,000,000

$2.10/$576,000,000

$1.80/$576,000,000

Question 3-22

When deciding how much cash to distribute to shareholders the main objective is to create shareholder wealth.

True

False

Question 1-18

RWB Co. has sales of $2,000,000 COGS 60% of sales, operating expenses $350,000, interest expense $20,000 depreciation $30,000. Tax 40%. 40% dividend payout. 50-50 target capital structure. They expect sales to increase by 10% with interest and depreciation expense staying the same. If they needed $55,000 of additional funds for current assets (spontaneous assets) to support the 10% growth, had $20,000 in spontaneous current liabilities, using the AFN or external funds requirement formula and no need for an increase in fixed assets they will have enough funds in retained earning to support that growth.

True

False

Question 2- 20

Green Co. announces a 3:1 stock split. Share price is $240, number of shares outstanding is 2,400,000, dividend is $4.20, EPS is $5.40.How many shares of stock will there be after the split? What will be the price per share?

2,400,000/240

7,200,000/80

800,000/$80

0/0