The market value balance sheet for Tidwell Manufacturing is shown here. The comp
ID: 2614413 • Letter: T
Question
The market value balance sheet for Tidwell Manufacturing is shown here. The company has declared a 10 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend). There are 25,000 shares of stock outstanding.
Market Value Balance Sheet Cash Fixed assets Total $ 346,000 810,000 Equity600,000 $946,000 $ 136,000 Debt $946,000 Total What will the ex dividend price be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Explanation / Answer
Before stock dividend:
Value of Equity = $600,000
Number of shares outstanding = 25,000
Price per share = Value of Equity / Number of shares outstanding
Price per share = $600,000 / 25,000
Price per share = $24.00
After stock dividend:
New shares outstanding = 25,000 * 1.10
New shares outstanding = 27,500
Value of Equity = $600,000
Price per share = Value of Equity / New shares outstanding
Price per share = $600,000 / 27,500
Price per share = $21.82
So, ex-dividend price is $21.82
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