1.) The common stock of ABC closed at $50 a share today. Tomorrow morning, the stock goes
ex-dividend. The dividend that is being paid this quarter is $0.25 per share. Assuming no taxes,
all else equal, you should expect the stock to open at a price of _____.
2.) The common stock of ABC closed at $40 a share today. Tomorrow morning, the stock goes
ex-dividend. The dividend that is being paid this quarter is $0.32 per share. Assuming tax rate on
dividends of 15%, all else equal, you should expect the stock to open at a price of _____ once
taxes are considered.
3.) ABC Stores has 20,000 shares of stock outstanding at a market price of $15 a share. If the
firm does a 3-for-5 stock split, the number of outstanding shares will be ____ at a market price of
_____ per share, all else constant.
4.) ABC Stores has 25,000 shares of stock outstanding at a market price of $30 a share. If the
firm does a 5-for-4 stock split, the number of outstanding shares will be ____ at a market price of
_____ per share, all else constant.
5.) ABC Stores has 25,000 shares of stock outstanding at a market price of $25 a share. Assume
that the firm does a 4-for-3 stock split. Kelly owns 150 shares. After the stock split, Kelly will
own ____ shares at a market price of _____ per share, all else constant.
6.) ABC Stores has 25,000 shares of stock outstanding at a market price of $22 a share. Kelly
owns 100 shares. If the firm declares a 20% stock dividend, Kelly will own ____ shares at a
market price of _____ per share, all else constant, after the stock dividend.
7.) ABC Stores has 20,000 shares outstanding at a market price per share of $40. The net income
is $30,000.
i.)What is the current market value of equity, earnings per share (EPS) and price-earnings (PE)
ratio?
ii.) The company has decided to repurchase $100,000 worth of shares. What are the number of
shares repurchased, new shares outstanding, new price per share, new market value of equity,
new EPS, and new PE ratio?
iii.)Suppose instead that the firm pays a cash dividend with a total value of $100,000. What are
the dividends per share (DPS), new shares outstanding, new price per share, new market value of
equity, new EPS, and new PE ratio?
8.) ABC Stores has 10,000 shares outstanding at a market price per share of $10. The EPS is
$2.50.
i.) The current total market value of equity is __________.
ii.) The current net income is ________________.
iii.) The current PE Ratio is _____________.
9.) The company has decided to repurchase $20,000 worth of shares. After the share repurchase( use #8
to answer)
i.)
ii.)
iii.)
the shares outstanding will be ______________.
the market price will be _____ per share.
the total market value of equity will be _______.
iv.) the net income will be __________.
v.) the EPS will be ___________.
vi.) The PE ratio will be ___________.
10.) In November 2004, Microsoft paid special dividends of $3 in addition to regular dividend of $0.08.
This was the largest cash disbursement in history (the special dividend payment amounted to $32.6
billion).
(Here is how you can check it: Go to Yahoo! Finance and enter MSFT under Quote Lookup. Next go to
Historical Data and select the period 08/01/2004 to 12/31/2004. Select Daily frequency and then click on
Apply. Now, answer the following questions: )
i.)
What was the Close price on November 12?
ii.)
What was the amount of dividend paid on November 15?
iii.)
Given a dividend tax rate of 15% (at that time), what should be the after-tax dividend
amount? what should be the ex-dividend price?
iv.)
What was the Open price on November 15? Is this price close to the ex-dividend price you
calculated in #3?

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