Connect Access Card For Intermediate Accounting
10th Edition
ISBN: 9781260481938
Author: David Spiceland, James Sepe, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Question
Chapter 18, Problem 18.16E
(1)
To determine
Buyback of Shares
Retire stock:
Buy back of shares from the shareholders by paying cash and obtaining the status of “authorized but unissued shares” is known as retired shares.
It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.
To journalize: The reacquired shares as treasury stock.
(2)
To determine
To journalize: The reacquired shares as retired shares.
(3)
To determine
To define: The term of buy back will serve “to offset dilution from executive compensation”.
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Problem 17-26 Payout Policy and Taxes (LO4)
Good Values Inc. is all-equity-financed. The total market value of the firm currently is $140,000, and there are 4,000 shares
outstanding. Ignore taxes.
a. The firm has declared a $5 per share dividend. The stock will go ex-dividend tomorrow. At what price will the stock sell today?
b. At what price will the stock sell tomorrow?
c. Now assume that the tax rate on all dividend income is 30% and the tax rate on capital gains is zero. At what price will the stock sell
today, taking account of the taxation of dividends? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
d. Now suppose that instead of paying a dividend, Good Values plans to repurchase $14,000 worth of stock. What will be the stock
price before the repurchase?
e. What will it be after the repurchase?
f. Does the existence of taxes tend to favor dividends or repurchases?
Answer is not complete.
a.
Stock price
$
35 O
b.
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30 O
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S14-15 Finding the WACC [LO3]
You are given the following information for Lightning Power Company. Assume the
company's tax rate is 21 percent.
Debt:
12,000 bonds with a 4.6 percent coupon outstanding, $1,000 par value,
25 years to maturity, selling for 105 percent of par; the bonds make
semiannual payments.
Common
stock:
575,000 shares outstanding, selling for $81 per share; the beta is 1.04.
Preferred
stock:
Market:
30,000 shares of 3.4 percent preferred stock outstanding, a $100 par
value, currently selling for $94 per share.
7 percent market risk premium and 3.2 percent risk-free rate.
What is the company's WACC? (Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC
%
Chapter 18 Solutions
Connect Access Card For Intermediate Accounting
Ch. 18 - Identify and briefly describe the two primary...Ch. 18 - Prob. 18.2QCh. 18 - Prob. 18.3QCh. 18 - Prob. 18.4QCh. 18 - Prob. 18.5QCh. 18 - Prob. 18.6QCh. 18 - Prob. 18.7QCh. 18 - What is meant by a shareholders preemptive right?Ch. 18 - Terminology varies in the way companies...Ch. 18 - Most preferred shares are cumulative. Explain what...
Ch. 18 - The par value of shares historically indicated the...Ch. 18 - Prob. 18.12QCh. 18 - How do we report components of comprehensive...Ch. 18 - The balance sheet reports the balances of...Ch. 18 - At times, companies issue their shares for...Ch. 18 - Prob. 18.16QCh. 18 - The costs of legal, promotional, and accounting...Ch. 18 - When a corporation acquires its own shares, those...Ch. 18 - Discuss the conceptual basis for accounting for a...Ch. 18 - The prescribed accounting treatment for stock...Ch. 18 - Brandon Components declares a 2-for-1 stock split....Ch. 18 - What is a reverse stock split? What would be the...Ch. 18 - Suppose you own 80 shares of Facebook common stock...Ch. 18 - Prob. 18.24QCh. 18 - Comprehensive income LO181 Schaeffer Corporation...Ch. 18 - Stock issued LO184 Penne Pharmaceuticals sold 8...Ch. 18 - Prob. 18.3BECh. 18 - Prob. 18.4BECh. 18 - Prob. 18.5BECh. 18 - Retirement of shares LO185 Agee Storage issued 35...Ch. 18 - Treasury stock LO185 The Jennings Group...Ch. 18 - Prob. 18.8BECh. 18 - Prob. 18.9BECh. 18 - Property dividend LO187 Adams Moving and Storage,...Ch. 18 - Stock dividend LO188 On June 13, the board of...Ch. 18 - Prob. 18.14BECh. 18 - Stock split LO188 Refer to the situation...Ch. 18 - Prob. 18.16BECh. 18 - Prob. 18.2ECh. 18 - Earnings or OCI? LO182 Indicate by letter whether...Ch. 18 - Stock issued for cash; Wright Medical Group LO184...Ch. 18 - Issuance of shares; noncash consideration LO184...Ch. 18 - Prob. 18.6ECh. 18 - Share issue costs; issuance LO184 ICOT Industries...Ch. 18 - Prob. 18.14ECh. 18 - Prob. 18.16ECh. 18 - Prob. 18.20ECh. 18 - Prob. 18.22ECh. 18 - Prob. 18.25ECh. 18 - Various stock transactions; correction of journal...Ch. 18 - Prob. 18.1DMPCh. 18 - Prob. 18.6DMPCh. 18 - Prob. 18.8DMP
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