The management of Oodles N Noodles Inc. is contemplating a 20% stock dividend. The company currently has cash of $300,000, fixed assets of $3.5 million, and debt of $1 million. Its net income for the most recent fiscal year was $500,000. The company’s shares are currently selling for $15 per share, and it has one million shares outstanding. Assume that there are no costs associated with issuing a stock dividend. a Before issuing the stock dividend, the company’s management would like to know the effect of such a stock dividend on the following: vii Price-earnings ratio (P/E)

The management of Oodles N Noodles Inc. is contemplating a 20% stock dividend. The company currently has cash of $300,000, fixed assets of $3.5 million, and debt of $1 million. Its net income for the most recent fiscal year was $500,000. The company’s shares are currently selling for $15 per share, and it has one million shares outstanding. Assume that there are no costs associated with issuing a stock dividend. a Before issuing the stock dividend, the company’s management would like to know the effect of such a stock dividend on the following: vii Price-earnings ratio (P/E)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 8PROB

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A5 10ai                                                       10. The management of Oodles N Noodles Inc. is contemplating a 20% stock dividend. The company currently has cash of $300,000, fixed assets of $3.5 million, and debt of $1 million. Its net income for the most recent fiscal year was $500,000. The company’s shares are currently selling for $15 per share, and it has one million shares outstanding. Assume that there are no costs associated with issuing a stock dividend. ai. Before issuing the stock dividend, the company’s management would like to know the effect of such a stock dividend on the following: aii. The number of shares outstanding
A5 10 c    10. The management of Oodles N Noodles Inc. is contemplating a 20% stock dividend. The company currently has cash of $300,000, fixed assets of $3.5 million, and debt of $1 million. Its net income for the most recent fiscal year was $500,000. The company’s shares are currently selling for $15 per share, and it has one million shares outstanding. Assume that there are no costs associated with issuing a stock dividend. c.       If all that the company’s shareholders care about are their wealth and the P/E ratio, should the company go ahead with the stock dividend?
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