Answered

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Suppose that you own 1,300 shares of Nocash Corp. and the company is about to pay a 25% stock dividend. The stock currently sells at $100 per share.
a. What will be the number of shares that you hold after the stock dividend is paid?
b. What will be the total value of your equity position after the stock dividend is paid?
c. What will be the number of shares that you hold if the firm splits five for four instead of paying the stock dividend?

Sagot :

Parrain

Answer:

a. Number of shares held after stock dividend:

= Current number of shares + (Current number of shares * Stock dividend percentage)

= 1,300 + ( 1,300 * 25%)

= 1,300 + 325

= 1,625 shares

b. Total value of equity position after stock dividend:

Stock dividend does not change the market value of equity as it reduces the price of each stock so the total value will be the same as before the stock dividend:

= 1,300 * 100

= $130,000

c. Number of shares if shares are split:

= Number of shares * split percentage

= 1,300 * 5/4

= 1,625 shares

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