You purchased 200 shares of H2O Corporation stock at a price of $20. Consider ea

Question

You purchased 200 shares of H2O Corporation stock at a price of $20. Consider each of the following announcements separately. What will the price of the stock be after each change? How many shares will you own? What will be the total value of your holdings (value of stock plus any income)? a. The fi rm announces a 10 percent stock dividend. b. The fi rm announces a two-for-one stock split . c. The fi rm announces a $0.50 per share dividend (in your answer use the price of the stock on the ex-dividend date). d. The fi rm announces it will repurchase 10 percent of its shares; you do not offer to sell any of your shares.

Explanation / Answer

a.) $4400 : You get 1 share for every 10 shares you hold as dividend. Hence now you own 220 shares each priced at $20

b.) $4000 : Stock split of two for one, increases your shares to 400.But the price will decrease to $10. Hence your total value remains at $4000

c.) $4100 : You get a dividend of 0.5*200 = $100

d.) $4400 : Due to repurchase of 10% shares, the price of share will increase to $22. Hence the value of your shares will become 200*22 = $4400

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.