The market value balance sheet for Outbox Manufacturing is shown here. Outbox ha
ID: 2731489 • Letter: T
Question
The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a 15 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend).
There are 22,000 shares of stock outstanding. What is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What will the ex-dividend price be? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a 15 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend).
Explanation / Answer
Ans:
The stock price is the total market value of equity divided by the shares outstanding:
Po = $651,000 equity / 22,000 shares = 29.5
The shares outstanding will increase by 25 percent, so:
New shares outstanding = 22,000(15%) = 25,300
The new stock price is the market value of equity divided by the new shares outstanding, so:
PX= $651,000/25,300 shares = $25.73
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.