Sam owns 1,000 shares of XYZ Corporation's common stock.The stock has a par value of $1 per share and is currently selling for $80 per share.XYZ declares a 20% stock dividend.In a perfect capital market,after the dividend Sam will have

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Quizplus · Accepted Answer

A 20% stock dividend means Sam will receive an additional 20% of his current shares, which is 200 shares (1,000 x 0.20). After the dividend, Sam will have a total of 1,200 shares (1,000 + 200). Since the price per share did not change, the new price per share will be the previous price per share divided by the new number of shares, which is $80/1,200 = $66.67. Therefore, Sam will have 1,200 shares selling for $66.67 each.

Sam Owns 1,000 Shares of XYZ Corporation's Common Stock