Metromat Has the Following Equity Accounts on Its Balance Sheet

question 34

Multiple Choice

Metromat has the following equity accounts on its balance sheet: $\begin{array}{lr}\text { Common stock ( } \$ 2 \text { par, } 2.4 \text { million shares) } & \$, 800,000 \\\text { Contributed capital in excess of par } & 33,600,000 \\\text { Retained earnings } & 134,400,000 \\\text { Total common stockholders' equity }&\$172,800,000\end{array}$ ? The current market price of Metromat's shares is $16. If the firm declares a 15% stock dividend and a $0.15 per share cash dividend, what will be the impact on contributed capital in excess of par? Assume a marginal tax rate of 40%.

• A) decreases $2.56 million
• B) increases $5.04 million
• C) increases $5.76 million
• D) does not change