Question

The following data apply to Garber Industries, Inc. (GII):

Value of operations

$1,000

Short-term investments

$100

Debt

$300

Number of shares

100

The company plans on distributing $50 million as dividend payments. What will the intrinsic per share stock price be immediately after the distribution?a. $6.32b. $6.65c. $7.00d. $7.35e. $7.72

Answer 1

c. $7.00

Step-by-step explanation:

Current Value of Garber Industries, Inc. (GII) :

$1,000 + $100 - $300 = $800

When company distributed the dividend of $50 then the value of the company will decline to $750 ($800 - $50).

The per share stock price of Garber Industries, Inc. will be

$750 / 100 shares = $7.50 per share.