Finance people, help!!!

[xchangx]

I'm stuck on a question that isn't explain in my book.

19.
Find below the Company?s balance sheet for year-end 2525.

Balance Sheet, 12/31/2525
.................$1,806 Debt
??...........$2,494 Stockholders equity
$4,300 $4,300 Total


For year 2526 the company forecasts Net income of $547 . The balance sheet at yearend
2526 lists Stockholders Equity of $3,010 . You are certain the company
repurchased zero stocks during 2526. Which statement about the company?s actions
during year 2526 is most consistent with the preceding facts?

a. the company paid $104 in dividends and issued stock worth $106
b. the company paid $104 in dividends and issued stock worth $92
c. the company paid $119 in dividends and issued stock worth $106
d. the company paid $137 in dividends and issued stock worth $106
e. the company paid $119 in dividends and issued stock worth $92


Anyone?

 

[xchangx]

Uggg. this is killing me! Does anyone know?

 

[FelixDeCat]

Well I took two years of accounting in college (but didnt get a degree) back in 1988-1989. All I remember was assets=liabilites + capital .

The question seems to be how to account for the change in Stockholder's Equity.

New value $3010
Prev value - 2494

Diff..............$..517 of growth.

$547 of *NET* income (asset) minus $517 of bottom line growth to Equity = ($-31) difference to account for.

The answer is "D" because it is the only answer that provides the ($-31) difference we are looking for.

$547
-137
=410
+106
=517

I wonder if Enron is hiring again?

 

[xchangx]

Thanks alot man, it all makes sense now (sorta).

Long shot here, any chance you could check this one out as well?

The Company balance sheet for year 2525 shows Total assets of $3,000 financed by
Debt of $400 and Stockholders? equity of $2,600 . There are 220 shares outstanding at
year-end 2525. The company plans to obtain venture capital by selling 80 additional
shares at their current book value to a venture capitalist. The company agrees to
repurchase the shares at year-end 2527 at a price equal to 132% of that year?s book
value. For year 2526 the company forecasts sales of $27,000 , a net profit margin (=
net income ÷ sales) of 7.20%, and a dividend payout ratio (= dividends ÷ net income) of
40%. Assume debt remains unchanged. For year 2527, sales should be higher by 14%
but the net profit margin and payout ratio should remain constant. Also, assume that
debt remains unchanged.
How much total cash flow (dividends plus repurchase price) does the venture capitalist
receive at year-end 2527?

a. $3,459 b. $2,363 c. $2,859 d. $3,145 e. $2,599

I've been at this all night, stuck on those 2 questions.

 

[FelixDeCat]

Originally posted by: xchangx
Thanks alot man, it all makes sense now (sorta).

Long shot here, any chance you could check this one out as well?

The Company balance sheet for year 2525 shows Total assets of $3,000 financed by
Debt of $400 and Stockholders? equity of $2,600 . There are 220 shares outstanding at
year-end 2525. The company plans to obtain venture capital by selling 80 additional
shares at their current book value to a venture capitalist. The company agrees to
repurchase the shares at year-end 2527 at a price equal to 132% of that year?s book
value. For year 2526 the company forecasts sales of $27,000 , a net profit margin (=
net income ÷ sales) of 7.20%, and a dividend payout ratio (= dividends ÷ net income) of
40%. Assume debt remains unchanged. For year 2527, sales should be higher by 14%
but the net profit margin and payout ratio should remain constant. Also, assume that
debt remains unchanged.
How much total cash flow (dividends plus repurchase price) does the venture capitalist
receive at year-end 2527?

a. $3,459 b. $2,363 c. $2,859 d. $3,145 e. $2,599

I've been at this all night, stuck on those 2 questions.

Yah that is a doozy, but I have to go to sleep now. It is beyond me why a company that is borrowing money and diluting shareholder equity is also paying dividends.

Good luck.