You purchased 200 shares of H2O Corporation stock at a price of $20. Consider ea

ID: 1171154 • Letter: Y

Question

You purchased 200 shares of H2O Corporation stock at a price of $20. Consider each of the following announcements separately.

1. The firm announces a 10 percent stock dividend.

A. What will the price of the stock be after each change?

B. How many shares will you own?

C. What will be the total value of your holdings (value of stock plus any income)?

2. The firm announces a 2-for-1 stock split

A. What will the price of the stock be after each change?

B. How many shares will you own?

C. What will be the total value of your holdings (value of stock plus any income)?

3. The firm announces a $0.50 per share dividend (in your answer use the price of the stock on the ex-dividend date – this is $20 per share).

A. What will the price of the stock be after each change?

B. How many shares will you own?

C. What will be the total value of your holdings (value of stock plus any income)?

4. The firm announces it will repurchase 10 percent of its shares; you do not offer to sell any of your shares.

A. What will the price of the stock be after each change?

B. How many shares will you own?

C. What will be the total value of your holdings (value of stock plus any income)?

Need Answer for all of these parts of the question. Please solve completely.

1) 10% stock dividend means company will give 10% of stock of your holding

a) Due to stock dividend total no of shares will increase by 10%, hence, new price = 20/110% = 18.18$

b) No of share owned = 200+10%(200) = 220 shares

c) Total value of holding = 220*18.18 = 4000$

2) 2 for 1 split means 2 shares for each share held in the company

a) Due to stock split total no of shares will increase by 50%, hence, new price =20/2=10$

b) No of share owned = 200*2 = 400 shares

c) Total value of holding = 400*10 = 4000$

3) $0.50 per share dividend

a) Price of the stock be after each change = 20-0.5 = 19.5$

b) No of share will be the same ie 200shares

c) total value of your holdings = Share price+ Dividend income

=200*19.5 + 200*0.5

=4000$

4) Repurchase of 10 percent of shares

a) Price of the stock be after each change = 20/90% = 22.22$

b) If we do not offer shares for repurchase than no of shares will remain same = 200 Shares

c) Value of holding = 200*22.22 = 4444.44$

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