What effect does a stock dividend have on the book and market values of the firm?
A)book value increases; market value increases
B)book value increases; market value decreases
C)book value decreases; market value increases
D)book and market values remain constant

Question

Quizplus · Accepted Answer

Stock dividends distribute additional shares to shareholders, which dilutes the share value but does not affect the total book value or market capitalization of the firm. The overall value remains constant, just distributed among a greater number of shares.

What Effect Does a Stock Dividend Have on the Book