Gypsum Corp.'s stock price is currently $50 a share. How much will the new stock price be if the firm declares a 10% stock dividend and the firm's market value remains the same?

Question

Quizplus · Accepted Answer

A 10% stock dividend means that for every 100 shares owned, a shareholder receives an additional 10 shares. If the market value remains the same, the value is spread over more shares, reducing the price per share. The new price can be calculated as the old price divided by (1 + dividend percentage), i.e., $50 / (1 + 0.10) = $45.45.