Murphy's has 10,000 shares outstanding with a par value of £1.00 per share.The market value is £8 per share.The statement of financial position shows £32,500 in the additional paid in capital account,£10,000 in the ordinary equity account and £42,700 in the retained earnings account.The firm just announced a 10% (small)stock dividend.What will the market price per share be after the dividend?

Question

Quizplus · Accepted Answer

After a 10% stock dividend, the number of shares increases by 10%, making it 11,000 shares. The total market value remains the same (£80,000), so the new market price per share is £80,000 / 11,000 = £7.27.

Murphy's Has 10,000 Shares Outstanding with a Par Value of £1.00