The market value balance sheet for Outbox Manufacturing is shown here. Outbox ha

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). Market Value Balance Sheet Cash $ 92,000 Debt $ 151,000 Fixed assets 760,000 Equity 701,000 Total $ 852,000 Total $ 852,000 There are 27,000 shares of stock outstanding.

What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a) Current share price ________ $
b) What will the ex-dividend price be?

Explanation / Answer

Net asset =Total asset - liability

               = 92000+ 760000 -151000

                  = 701000

current price =Net asset Market value / Number of shares outstanding

                   = 701000 / 27000

                   = $ 25.96 per share

b)Number of shares outstanding after stock dividend = 27000 (1+.20) = 32400 shares

Ex-dividend price = 701000 / 32400 = $ 21.64 per share

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