Sorsi has declared a 15% stock dividend. If the stock was selling for $34 before the ex-dividend date, what should its price be on the ex-dividend date?
A) $34.00
B) $29.57
C) $28.90
D) $30.91

Question

Quizplus · Accepted Answer

A 15% stock dividend means that for every 100 shares owned, an investor would receive an additional 15 shares. This increases the total number of outstanding shares of the company and dilutes the ownership of existing shareholders. As a result, the stock price typically falls by approximately the same percentage as the stock dividend.

In this case, the stock price should fall by 15% of $34, which is $5.10. Therefore, the stock price on the ex-dividend date should be $34 - $5.10 = $28.90.

Therefore, the best choice is B.

Sorsi Has Declared a 15% Stock Dividend