Question

The balance in retained earnings at December 31,2024 was $1449000 and at December 31,2025 was $1162000. Net income for 2025 was $1011000. A stock dividend was declared and distributed, increasing common stock by $504000 and paid-in capital by $220000. A cash dividend was also declared and paid. T

he stock dividend should be reported on the statement of cash flows (indirect method) as
a.an outflow from financing activities of $724000.
b.stock dividends are not shown on a statement of cash flows.
c.an outflow from financing activities of $504000.
d.an outflow from investing activities of $724000.

Answer 1

To calculate the price an investor might pay for a share of stock in Babble, Inc., one would add the present value of expected dividend payments. This requires determining the sum of the discounted dividends that will be paid out until the company is disbanded. Without the required rate of return, an exact value cannot be calculated.

Step-by-step explanation:

To determine what an investor would pay for a share of stock in Babble, Inc., we must consider the total expected dividends since the company will be disbanded in two years. An investor typically calculates the present value of expected future dividends to determine the stock price they are willing to pay. The present value of dividends for Babble, Inc. is the sum of dividends expected right away ($15 million), in one year ($20 million), and in two years ($25 million), divided by the number of shares (200), and discounted back to their present value using a required rate of return.

If we assume that the required rate of return is 'r', the present value (PV) of each dividend payment would be calculated using the formula PV = Dividend / (1 + r)^n, where 'n' is the number of years in the future the dividend will be received. Since Babble, Inc. will distribute all profits as dividends, an investor would calculate the value of each dividend payment using this formula and sum them up to determine the price they are willing to pay for each share.

However, the question does not provide a required rate of return. This is essential for calculating the present value of the dividends. If it were provided, an investor could calculate the present value for each year's dividend and add them together to find out the total value they would be willing to pay for a share right now.

Answer 2

To calculate the price an investor might pay for a share of stock in Babble, Inc., one would add the present value of expected dividend payments. This requires determining the sum of the discounted dividends that will be paid out until the company is disbanded. Without the required rate of return, an exact value cannot be calculated.

Step-by-step explanation:

To determine what an investor would pay for a share of stock in Babble, Inc., we must consider the total expected dividends since the company will be disbanded in two years. An investor typically calculates the present value of expected future dividends to determine the stock price they are willing to pay. The present value of dividends for Babble, Inc. is the sum of dividends expected right away ($15 million), in one year ($20 million), and in two years ($25 million), divided by the number of shares (200), and discounted back to their present value using a required rate of return.

If we assume that the required rate of return is 'r', the present value (PV) of each dividend payment would be calculated using the formula PV = Dividend / (1 + r)^n, where 'n' is the number of years in the future the dividend will be received. Since Babble, Inc. will distribute all profits as dividends, an investor would calculate the value of each dividend payment using this formula and sum them up to determine the price they are willing to pay for each share.

However, the question does not provide a required rate of return. This is essential for calculating the present value of the dividends. If it were provided, an investor could calculate the present value for each year's dividend and add them together to find out the total value they would be willing to pay for a share right now.