Question

Gloria Company has 100,000 common shares authorized, 33,000 shares issued and outstanding. On September 1, 2021, the company declared a $3.30 per share dividend for those of record on October 1, 2021, to be paid on November 1, 2021.

Based on this information, which of the following journal entries would Gloria Company make on November 1, 2021?

Answer 1

To determine the price an investor would pay for a share of stock in Babble, Inc., calculate the present value of expected future dividends, considering immediate profits of $15 million, and $20 million and $25 million in the following two years respectively.

Step-by-step explanation:

The subject of this question is the calculation of the value of a share of stock in a hypothetical company, Babble, Inc. This falls under the topic of finance within the broader subject of business.

To determine what an investor would pay for a share of this company, one would take into account the projected dividends, which are the expected profits to be paid to shareholders, and the time value of money.

Considering the profits are expected to be $15 million immediately, $20 million one year from now, and $25 million two years from now, and assuming a certain discount rate, an investor would use the present value formula for each of the expected dividends to calculate the total present value of the investment, which would represent the value an investor might be willing to pay for a share of the company.