The market value balance sheet for Outbox Manufacturing is shown here. Outbox ha
ID: 2745389 • Letter: T
Question
The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a stock dividend of 20 percent. The stock goes ex-dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend).
There are 23,000 shares of stock outstanding. What is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
What will the ex-dividend price be? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a stock dividend of 20 percent. The stock goes ex-dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend).
Explanation / Answer
CURRENT SHARE PRICE
= CURRENT VALUE OF EQUITY / NUMBER OF SHARE OUTSTANDING
= $661000 / 23000
= $28.74
REVISED SHARE OUTSTANDING
= 23000 * 120%
= 27600
EX DIVIDEND PRICE
= MARKET VALUE OF EQUITY / NUMBER OF SHARE OUTSTANDING
= 661000 / 27600
= $23.95
=
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