1. Problem 19-4 Stock Splits and Stock Dividends Roll Corporation (RC) currently has 330,000 shares of stock outstanding that sell for $64 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. RC has a five-for-three stock split? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) New share price $ b. RC has a 15 percent stock dividend? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) New share price $ c. RC has a 42.5 percent stock dividend? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) New share price $ d. RC has a four-for-seven reverse stock split? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) New share price $ e. Determine the new number of shares outstanding in parts (a) through (d). (Do not round intermediate calculations and round your answers to the nearest whole number. (e.g., 32)) a. New shares outstanding b. New shares outstanding c. New shares outstanding d. New shares outstanding 2. Problem 19-16 Dividend Smoothing The Sharpe Co. just paid a dividend of $1.80 per share of stock. Its target payout ratio is 40 percent. The company expects to have an earnings per share of $4.95 one year from now. a. If the adjustment rate is .3 as defined in the Lintner model, what is the dividend one year from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Dividend $ b. If the adjustment rate is .6 instead, what is the dividend one year from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Dividend $ c. Which adjustment rate is more conservative? .6 .3 3. Problem 29-16 Mergers and Shareholder Value Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each companys value in that state are shown here: State Probability Bentley Rolls Boom .70 $ 290,000 $ 260,000 Recession .30 $ 110,000 $ 80,000 ________________________________________ Bentley currently has a bond issue outstanding with a face value of $125,000. Rolls is an all-equity company. a. What is the value of each company before the merger? (Do not round intermediate calculations.) Value of Bentley $ Value of Rolls $ ________________________________________ b. What are the values of each companys debt and equity before the merger? (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations.) Equity of Rolls $ Debt of Rolls Equity of Bentley $ Debt of Bentley $ ________________________________________ c. If the companies continue to operate separately, what are the total value of the companies, the total value of the equity, and the total value of the debt? (Do not round intermediate calculations.) Value of companies $ Value of equity $ Value of debt $ ________________________________________ d.1 What would be the value of the merged company? (Do not round intermediate calculations.) Merged company value $ d.2 What would be the value of the merged companys debt and equity? (Do not round intermediate calculations.) Value of the company Value of debt $ Value of equity $ ________________________________________ e-1. How much would shareholders gain or lose in the merger? (Do not round intermediate calculations. Enter a gain as a positive number and a loss as a negative number.) Shareholders’ gain or loss $ e-2. How much would bondholders gain or lose in the merger? (Do not round intermediate calculations. Enter a gain as a positive number and a loss as a negative number.) Bondholders’ gain or loss $ 4. Problem 29-8 EPS, PE, and Mergers The shareholders of Flannery Company have voted in favor of a buyout offer from Stultz Corporation. Information abou…
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