Metromat Has the Following Equity Accounts on Its Balance Sheet

question 37

Multiple Choice

Metromat has the following equity accounts on its balance sheet: $\begin{array}{lr}\text { Common stock ( } \$ 2 \mathrm{pr}, 2.4 \text { million shares }) & \$ 4,800,000 \\\text { Paid in excesss } & 33,600,000 \\\text { Retained earnings } & 134,400,000\\\text { Total common stockholders' equity }&\$172,800,000\end{array}$ The current market price of Metromat's shares is $16. If the firm declares a 15% stock dividend and a $.15 per share cash dividend, what will be the impact on the paid in excess account? 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

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