Chapter 17 SavedHelp Save Exit Submit Check my work uppose

Chapter 17 SavedHelp Save & Exit Submit Check my work uppose that you own 1,500 sh company is about to pay a 25% stock dividend. The stock currently ells at $115 per share of Nocash Corp. and the 6 points a. What will be the number of shares that you hold after the stock dividend is paid? (Do not round intermediate calculations.) of shares eBook Print b. What will be the total value of your equity position after the stock dividend is paid? (Do not round intermedlate calculations.) References Total value c. What will be the number of shares that you hold if the firm splits five-for-four instead of paying the stock dividend? Number of shares hold Prev 1 of 3 ??? Next >

Solution

a. Stock Dividend = 25% of 1500 shares

                           = 375 shares

Total shares after stock dividend = 1500 + 375

                                                 = 1875 shares

b. There will be no chnage in value of the shares because the company is paying stock dividend and the number of shares will increase and the market capitalisation of the company will not chnage as the price will go down accordingly. Hence the value will be 1500 shares x $115 i.e $172,500. This is the acutal what happens if this is not the answer thne the Total value will be 1875 shares x 115 i.e $215,625.

c. Five for four means you will receive 5 shares for every 4 shares. hence-

total shares received as restult of stock split = 1500 x 5 / 4

                                                                   = 1875 shares

Total share after stock split                         = 1500 +1875

                                                                  = 3375 shares