18-13 Peabody Mining Company' s common stock is selling for $50 the day before the stock goes ex-dividend. The annual dividend yield is 5.6 percent, and dividends are distributed quarterly. Based solely on the impact of the cash dividend, by how much should the stock go down on the ex-dividend date? What will the new price of the stock be? Solution: Pea body Mining Company Annual dividend 56%X$50=$2.80 Quarterly dividend $280/4=$.70 The stock should go down by $.70 to $49.30 18-14. Sun Energy Company has the folle capital section in its balance sheet. Its stock is currently selling for $5 per share Common stock(100,000 shares at $I par) $100,000 Capital in excess of par Retained earnings 200000 The firm intends to first declare a 10 percent stock dividend and then pay a 30- cent cash dividend (which also causes a reduction of retained earnings ). Show the capital section of the balance sheet after the first transaction and then after he second transaction Solution: Sun Energy company After 1st transaction Common stock(110,000 shares at $I par) $110,000 Capital in excess of par 140,000 Retained earnings 150.000 $400,000 S-639 Copyright C2005 by The McGra-Hill Companies, Inc.Copyright © 2005 by The McGraw-Hill Companies, Inc. S-639 18-13. Peabody Mining Company’s common stock is selling for $50 the day before the stock goes ex-dividend. The annual dividend yield is 5.6 percent, and dividends are distributed quarterly. Based solely on the impact of the cash dividend, by how much should the stock go down on the ex-dividend date? What will the new price of the stock be? Solution: Peabody Mining Company Annual dividend = 5.6% x $50 = $2.80 Quarterly dividend = $2.80/4 = $.70 The stock should go down by $.70 to $49.30. 18-14. Sun Energy Company has the following capital section in its balance sheet. Its stock is currently selling for $5 per share. Common stock (100,000 shares at $1 par)................. $100,000 Capital in excess of par.............................................. 100,000 Retained earnings....................................................... 200,000 $400,000 The firm intends to first declare a 10 percent stock dividend and then pay a 30- cent cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction. Solution: Sun Energy Company After 1st transaction Common stock (110,000 shares at $1 par)......... $110,000 Capital in excess of par ........................................ 140,000 Retained earnings.................................................. 150,000 $400,000