Cookies and More has 8,000 shares of stock outstanding at a market price of $13.60 per share. What will the price per share be after the firm declares a 10 percent stock dividend? Ignore taxes and market imperfections.

Question

Quizplus · Accepted Answer

After a 10% stock dividend, the total number of shares outstanding will be 8,800 (8,000 * 1.1). The value of the shares outstanding will remain the same, so the total value of the stock will be $119,680 ($13.60 * 8,800). To find the new price per share, divide the total value by the new number of shares outstanding: $119,680 ÷ 8,800 = $13.60 ÷ 1.10 = $12.36. Therefore, the answer is choice B.

Cookies and More Has 8,000 Shares of Stock Outstanding at a Market