Hewlard Pocket’s market value balance sheets illustrate the effects of dividends versus repurchases. Assets Liabilities and Shareholders’ Equity A. Original balance sheet Cash $ 150,000 Debt $ 0 Other assets 950,000 Equity 1,100,000 Value of firm $ 1,100,000 Value of firm $ 1,100,000 Shares outstanding = 100,000 Price per share = $1,100,000 / 100,000 = $11 Pocket wins a lawsuit and is paid $110,000 in cash. The market value of the equity rises by that amount, and Pocket decides to pay out $2.10 per share. a. What will be Pocket’s stock price if the payout comes as a cash dividend? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price $ per share b. What will be Pocket’s stock price if the payout comes as a share repurchase? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price $ per share Solution: a) Pocket’s stock price if the payout comes as a cash dividend = market price per share - dividend per share = {(equity amount + Amount win as lawsuit)/ Shares outstanding} - $2.10 per share = {($1,100,000 + $110,000 )/ 100,000 }- $2.10 = $12.10 - $2.10 = $10 is the stock price. b) Pocket’s stock price if the payout comes as a share repurchase = $12.10. here, with that amount company repurchased shares: Thus, the number of shares repurchased = (shares outstanding * dividend per share) / stock price = (100,000shares * $2.10) / $12.10 =17,355 shares repurchased. 26Q Dave is a 50% partner with Luis in the NP partnership. The partners share income and loss equally. He contributes land to the partnership worth $1,200 in which he has an adjusted basis of $400. The land is a capital asset to him and to the partnership. Two years later the partnership sells the land for $1,600. A: How much gain or loss does the partnership recognize on the sale? B: How much is allocated to each partner? C: Does the answer to part (b) change (and if so how) if the partnership sells the land for $700? Explain.