Sipacore Inc. is considering one of the three following courses of action: (1) paying a $0.50 cash dividend, (2) distributing a 5% stock dividend, or (3) effecting a 2-for-1 stock split. The current share price is $14 per share. Help Sipacore make its decision by completing the following chart (treat each possibility independently): Total assets (1) Before Action After Cash Dividend $1,196,000 $ 1,146,000 $ (2) After Stock Dividend 1,196,000 $ Total liabilities $243,000 $ 243,000 $ 243,000 $ Shareholders' equity Common shares 647,000 647,000 710,000 Retained earnings 306,000 256,000 306,000 Total shareholders' equity 953,000 903,000 953,000 Total liabilities and shareholders' equity $1,196,000 $ 1,146,000 $ 1,196,000 $ Number of common shares 100,000 100,000 105,000

Sipacore Inc. is considering one of the three following courses of action: (1) paying a $0.50 cash dividend, (2) distributing a 5% stock dividend, or (3) effecting a 2-for-1 stock split. The current share price is $14 per share. Help Sipacore make its decision by completing the following chart (treat each possibility independently): Total assets (1) Before Action After Cash Dividend $1,196,000 $ 1,146,000 $ (2) After Stock Dividend 1,196,000 $ Total liabilities $243,000 $ 243,000 $ 243,000 $ Shareholders' equity Common shares 647,000 647,000 710,000 Retained earnings 306,000 256,000 306,000 Total shareholders' equity 953,000 903,000 953,000 Total liabilities and shareholders' equity $1,196,000 $ 1,146,000 $ 1,196,000 $ Number of common shares 100,000 100,000 105,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 12P

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