After-tax net income

John Pepmeier, your longtime friend, owns 2,000 shares of $1 par value common stock in Sports Stuff Inc. There are 1,000,000 shares of common stock authorized, and 800,000 shares are issued and outstanding. Recently, the company was authorized to issue 200,000 shares of $50 par value preferred stock. These shares have a dividend rate of 8 percent based on par value, and they are cumulative. The company expects to sell 10,000 shares of the preferred stock in the near future to finance the acquisition of more production facilities. John has studied the firm’s annual reports in an effort to determine the impact the new stock issue will have on his dividends. He is confused because his $1 par value common stock has a market value of $50 per share. He has received a $5 dividend per share in recent years. The company has consistently maintained a policy of paying out 70 percent of its after-tax net income as dividends, a policy management expects to continue into the foreseeable future. Aside from being confused about the difference between par value and market value, John is concerned that the company will not make enough net income to maintain his $5 per share dividend.

Required:

A. Explain to John in memo form the difference between par value and market value.

B. Show John how to compute the minimum amount of after-tax net income the company must earn for him to receive a $5 per share dividend if the 10,000 shares of preferred stock are sold.

Solution:

Looking for help with your homework?
Grab a 30% Discount and Get your paper done!

30% OFF
Turnitin Report
Formatting
Title Page
Citation
Place an Order

Calculate your paper price
Pages (550 words)
Approximate price: -

Why Us

Exemplary Academic Writing Service

At TheQuizlet.com, you are guaranteed of quality service from our professional writers. We maintain consistent communication with customers after placing an order to avoid missing anything that may compromise the quality of delivered work.

Top Writers

Our hiring process is rigorous to maintain the desired quality that has become the core of our business. We expose potential writers to an uncompromising selection process that enables TheQuizlet to pick the best out of the rest. TheQuizlet boasts of a competent team of writers, editors, and professors who work towards accomplishing your goals.

Plagiarism-Free Papers

TheQuizlet has an in-house plagiarism software that lowers the probability of delivering plagiarized papers to our clients. Referencing is guided by the format specified by a customer when placing an order. Our writers are conversant with all referencing formats that include APA, MLA, Chicago, Harvard, and Vancouver among others.

24/7 Customer Support

We understand the importance of effective communication and as such, TheQuizlet has a dedicated customer support department that responds to all client needs. You can easily contact our team through a chat window at the bottom left corner. Additionally, clients can reach us through support’s email or a telephone number available on our contact page. Feel free to contact us at any time and our team of experts will solve all your problems.

Swift Delivery and 100% Money-back Guarantee

When placing an order, ensure that you specify the correct deadline to help our writers work around the provided timeline. At TheQuizlet, we deliver our tasks before the projected deadline to give time for the customer to proofread the work before submission. In the event we cannot deliver a paper on time, we initiate contact with the client to renegotiate a new deadline.

Unlimited and Free Revisions

We urge all our customers to request for a revision whenever they identify a need to amend the paper. Since we understand your concerns, TheQuizlet.com does not charge for revisions. Nonetheless, we encourage customers to be genuine when requesting for revisions.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

TheQuizlet is a one-stop shop for all your writing needs. We tackle each customer’s needs differently to improve the quality of outcomes and meet your expectations.

Essays

Academic Help Service

TheQuizlet is committed to delivering quality work on time to ensure our clients get the value for their money.

Admissions

Admission Essays and Professional Writing

Admission essays are personal, as opposed to other papers. For this reason, our team will request for any information that will enable them to deliver quality work, which allows you to convince the admissions board on why you should be granted the application.

Reviews

Editing and Proofreading

Our team comprises of qualified researchers, writers, and editors who go through the different papers before delivering them to our clients. Whether your paper is being written from scratch or you want it to be edited, you can trust TheQuizlet for all your needs.

Reviews

Revision Support

After receiving the final draft, you can request for a revision to incorporate various changes that are aligned with your expectations. All our papers are written in line with the latest writing standards.

AllEscortAllEscort