Question

The balance sheet for Levy Corp. is shown here in market value terms. There are 8,000 shares of stock outstanding.

  

Market Value Balance Sheet
Cash	$	44,000		Equity	$	384,000
Fixed assets		340,000
Total	$	384,000		Total	$	384,000

  

The company has declared a dividend of $1.70 per share. The stock goes ex-dividend tomorrow.

Ignoring any tax effects, what is the stock selling for today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

Current stock price

$  per share

  

Ignoring any tax effects, what will it sell for tomorrow? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

New stock price

$  per share

  

Ignoring any tax effects, what will the balance sheet look like after the dividends are paid? (Do not round intermediate calculations.)

Market Value Balance Sheet
Cash	$			Equity	$
Fixed assets
Total	$			Total	$

Answer 1

1- Current Value of share= Total market value of equity

No. of Share

=$384000/8000=$48 per share

2.- Total Dividend=8000*1.70$=$13600

Cash Balance=$44000-13600=$30400

Market Value Balance Sheet
Cash	$	30,400		Equity	$	370,400
Fixed assets		340,000
Total	$	370,400		Total	$	370,400

Price per Share=370400/8000=$46.3

Answer 2

(1)

Current stock price = 384,000/8,000 = 48

(2)

New stock price = 48 - 1.7 = 46.3

(3)

Market Value Balance Sheet
Cash	$	30,400	=44,000-8,000*1.7	Equity	$	370,400
Fixed assets		340,000
Total	$	370,400		Total	$	370,400