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Stockholder Rights and Dividend Problems

The document presents sample problems related to stockholder rights, focusing on preemptive rights and dividend distribution. It includes calculations for share subscriptions, cash generation, and dividend yields for different classes of stock in two corporations, Moon, Inc. and Devy Corporation. The problems require determining the impact of stockholder decisions on ownership percentages and dividend distributions.

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134 views1 page

Stockholder Rights and Dividend Problems

The document presents sample problems related to stockholder rights, focusing on preemptive rights and dividend distribution. It includes calculations for share subscriptions, cash generation, and dividend yields for different classes of stock in two corporations, Moon, Inc. and Devy Corporation. The problems require determining the impact of stockholder decisions on ownership percentages and dividend distributions.

Uploaded by

s2301505
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

FINMAR - RIGHTS OF THE STOCKHOLDER

SAMPLE PROBLEMS

Sample Problem I - Preemptive Right

Moon, Inc. is a family owned corporation with an authorized capital stock of P20million,
P20 par value. Seventy five percent of the authorized were subscribed and paid. May owns
one half of the issued stocks. June holds an equivalent of fifty percent of what May owns; and
Julie owns an equivalent to seventy five percent of what June holds; the balance to other
stockholders.
The board of Moon, Inc. declared an additional issuance of stock for subscription of
60% of the unissued capital stock. This will allow all stockholders to exercise their preemptive
right. The subscription price is 50% above par value.

Required:
1. How many shares are offered for subscription? How much cash can be generated from this
subscription?
2. If May, June and Julie will exercise their rights to subscribe, what is the maximum number
of shares each can subscribed? How much cash maybe realized from each subscription?
3. Assuming that May, June and Julie will not exercise their preemptive rights, and their rights
will be exercised by other stockholders, what is the percentage of their holdings in firm after
the subscription
4. Assuming that only June will not subscribe and his subscription will be offered to other
stockholders, what is the percentage holdings of May, June and Julie in the firm?
5. Assuming May will not subscribe and her subscription will be taken both by June and Julie
in proportion to their holdings before subscription, what will be the percentage holdings of May,
June and Julie in the firm.

Sample Problem 2 - Right to Dividends - Dividend Yield

Capital structure of Devy Corporation:

12% Preferred stock, Non-cumulative, participating, P20 par, 20,000 shares


10% Preferred stock, Cumulative, non-participating, P20 par, 30,000 shares
8% Preferred stock, Cumulative, participating, P20 par, 30,000 shares
Common stock, P50 par, 40,000 shares

During the current year, the board declared an amount of P500,000 as cash dividends.
It has been noted that no dividends were declared last year. At the time the declaration of
dividends, the market price of Devy stock, follows:
12% Preferred stock, P20.50 per share
10% Preferred stock, P21.00 per share
8% Preferred stock, P22.00 per share
Common stock, P50.50 per share

Required:
a. Distribute the cash dividends to common and among the preferred shareholders
b. Compute for dividend per share for common and preferred shares
c. Compute for dividend yield for common and preferred shares of stock
d. Rank your investment priorities

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