XYZ Corp. has 1,000 shares outstanding and retained earnings of $25,000. Theoretically, what would you expect to happen to the price of their stock, currently selling for $30 per share, if a 25% stock dividend is declared?
A) Price should increase to $44.00 per share.
B) Price should increase to $37.50 per share.
C) Price should decrease to $24.00 per share.
D)Nothing; price should remain at $30.00.

Question

Quizplus · Accepted Answer

New price = $30/(1 + 0.25) = $24

XYZ Corp Has 1,000 Shares Outstanding and Retained Earnings of $25,000