1). The company with the common equity accounts shown here has declared a 10 percent stock dividend at a time when the

Question

1). The company with the common equity accounts shown here has declared a 10 percent stock dividend at a time when the market value of its stock is $57 per share. Common stock ($1 par value)$500,000 Capital surplus 1,558,000 Retained earnings 3,884,000 Total owners' equity$5,942,000 Show the new equity account balances after the stock dividend distribution. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) 2). A project with a life of 9 has an initial fixed asset investment of $41,580, an initial NWC investment of $3,960, and an annual OCF of -$63,360. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 18 percent, what is the project's equivalent annual cost, or EAC? 3). What should be the amount in an RRSP that is earning 6.00% compounded quarterly if it can be converted to an RRIF that will provide $500 at the beginning of each month for 5 years?

Help In Homework · Accepted Answer

1). Please see the attachment: Working note:- Current number of shares = Common stock / Par value = $500,000 / $1 = 500,000 shares Number of shares to be distributed = Number of shares * Stock dividend = 500,000 * 10% = 50,000 shares 2). Equivalent annual cost (EAC) = -$73,735.78 3). Computation of the present value of annuity due:- Present value = Annuity + (Annuity*(((1-(1+rate)^-(n-1))/rate)) = $500 + ($500*(((1-(1+0.498%)^-(60-1))/0.498%)) = $500 + ($500 * 51.0201) = $500 + $25,510.06 = $26,010.06 Working note:- n = 5*12 = 60 periods (monthly) EAR = (1+rate/n)^n-1 = (1+6%/4)^(4/12) -1 = 1.00498 - 1 = 0.498%

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