Using a Fair Value Balance Sheet, a Company's Financial Position

Multiple Choice

Using a Fair Value Balance Sheet, a company's financial position is as follows: cash of $30,000, total assets, net of cash, of $330,000, total debt of $200,000 and $160,000 worth of owners' equity, comprised of 100,000 common shares and $60,000 of retained earnings. If the company pays out its total cash in dividends, what happens to a shareholder's financial position?

A) It diminishes as the share value drops from $1.60 to $1.30.
B) It increases as share price is unchanged as dividends reduce retained earnings, and dividend payout equal $0.30 a share.
C) It diminishes as dividends at $0.30 a share do not offset decreases in share value by $0.60 a share.
D) It is unchanged as the $0.30 reduction in share value will be offset by the $0.30 in dividends.
E) It diminishes as leverage will cause a reduction in equity to be more than offset by a loss in income.