Olive Company pays an 8 percent stock dividend. Olive Company had 500,000 shares outstanding and a stock price of $22 before the stock dividend. The price of Olive Company stock after the dividend is nearest to:

Question

Quizplus · Accepted Answer

After an 8 percent stock dividend, the number of shares increases by 8 percent, so the new total is 540,000 shares (500,000 * 1.08). The total value of the company doesn't change due to a stock dividend, so it remains at $11,000,000 (500,000 * $22). The new price per share is the total value divided by the new number of shares, which is $11,000,000 / 540,000 = $20.37.

Olive Company Pays an 8 Percent Stock Dividend