The market value balance sheet for Outbox Manufacturing is shown below. Outbox h
ID: 2674206 • Letter: T
Question
The market value balance sheet for Outbox Manufacturing is shown below. Outbox has declared a 25 percent stock dividend. The stock goes exdividend tomorrow (thee chronology for a stock dividend is similar to that for a cash dividend). there are 30,000 shares of stock outstanding.Market Value Balance Sheet
Cash $145,000
Fixed Assets $598,000
Total $743,000
Debt $127,000
Equity $616,000
Total $743,000
Find the market price of stock by using the equity and #of shares outstanding =
New shares outstanding =
New Stock price =
Explanation / Answer
Market price = Equity / #of shares outstanding = 616000/30000 Market price = $20.53 For 25% of stock dividend, every 1 share got 0.25 new share New share outstanding = 30000(1+0.25) = 37500 Since Firm's equity remains the same, the stock price will fall New stock price = 616000/37500 = $16.43
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