James Fabricators Just Liquidated Its Poorest Performing Division and Realized

question 90

Multiple Choice

James Fabricators just liquidated its poorest performing division and realized net proceeds from the transaction of $2.2 million.The firm has 200,000 shares of stock outstanding at a market price of $62 a share.Which one of the following is the best estimate of the stock's post-dividend price per share if the firm distributes the entire liquidation proceeds in the form of a liquidating dividend? Ignore taxes and market imperfections.

• A)$51.00
• B)$51.38
• C)$53.40
• D)$58.79
• E)$62.00

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Definitions:

Mortgage Bond

A bond secured by a mortgage on a property, where the bondholders have a claim on the property in case of default.

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature.

Coupon Bond

A bond that offers interest payments to its holder through coupons attached to the bond, redeemable at specified intervals before the bond's maturity date.

Zero Coupon Bond

A bond that is issued at a discount to its face value and pays no interest before maturity, when its full face value is repaid.