Question 1 ACME INC has decided on a 25% stock dividend. If the firm currently h

Question

Question 1

ACME INC has decided on a 25% stock dividend. If the firm currently has 800,000 shares outstanding, how many shares will be outstanding after the stock split?

Question 2

Jameis owns 100 shares of ACME Inc. the firm has a quarterly dividend policy of $0.50 per share or the option to reinvest the cash dividends into additional shares of company stock. If the stock is selling for $108.00 per share ex-dividend, how many shares of stock will Jameis receive in the next dividend period if he chooses the dividend reinvestment plan?

Explanation / Answer

Question 1

Current share outstanding = 800,000

Stock dividend = 25%

Stock dividend = 80,0000 * 25% = 200,000

Share outstanding after the stock split = 800,000 + 200,000 = 1,000,000

or 800000 * ( 1 + 0.25) = 1,000,000

Question 2

Jameis share = 100 share

Dividend per share =$ 0.50

Dividend receive by jamies = 100 share * 0.50 per share = 50 Per share

Stock selling price = $ 108

Number of stock reinvested = $ 50 / 108 = 0.463

Total share at end of period = 100 + 0.463 = 100.463

Dividend receive in the next dividedn peirod = 100.463 * 0.50 = 50.231

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