Martha's Baked Goods has 15,000 shares of stock outstanding at a market price of $24.10 per share. What will the price per share be after the firm declares a 5 percent stock dividend? Ignore taxes and market imperfections.

Question

Quizplus · Accepted Answer

With a 5% stock dividend, the number of outstanding shares will increase by 5% or 0.05(15,000) = 750 shares. The total number of outstanding shares will be 15,750. The total value of the shares will remain the same at $15,000 x $24.10 = $361,500. To find the new price per share, we divide the total value by the new total number of shares: $361,500 / 15,750 = $22.95 per share.

Martha's Baked Goods Has 15,000 Shares of Stock Outstanding at a Market