Mr. R. owns 20,000 shares of ABC Corporation stock. The company is planning to issue a stock dividend. Before the dividend, Mr. R. owned 10 percent of the outstanding stock, which had a market value of $200,000, or $10 per share. Upon receiving the 10 percent stock dividend the value of his shares is _________.
A) $210,000
B) $200,000
C) $220,000
D) greater, but cannot be determined

Question

Quizplus · Accepted Answer

A stock dividend increases the number of shares owned but does not change the total market value of the shares. Mr. R. will own more shares, but the price per share will adjust so that the total value remains $200,000.

Mr R Owns 20,000 Shares of ABC Corporation Stock