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Devidend Decision Questions
Devidend Decision Questions
Devidend Decision Questions
Q1. Lee Ann, Inc., has declared $7.50 per share dividend. Suppose
capital gain are not texed, but dividends are taxed at 15%. New
regulations required that taxes be withheld when the dividend is paid.
The company’s stock sells for $93 per share, and is about to go ex-
dividend. What do you think the ex dividend price will be?
Ans:
After-tax Dividend $ 6.38
a. The company's stock currently sells for $39 per share and a 10% stock dividend is declared, how
many shares will be distributed? Show how the equity accounts would change.
b. If the company declared a 25% stock dividend, how would account changes?
a. New shares outstanding 44,000
Ans: New shares issued 4,000
Capital surplus on new shares $ 1,52,000