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Question: The market value balance sheet for Bobaflex Manufacturing is shown here. The company has declared...
The market value balance sheet for Bobaflex Manufacturing is shown here. The company has declared a 15 percent stock dividend. 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 $ 87,000 Debt $ 146,000
Fixed assets 710,000 Equity 651,000
Total $ 797,000 Total $ 797,000
  

There are 22,000 shares of stock outstanding. What is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
  

Current stock price $
  

What will the ex-dividend price be? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
Ex-dividend price $

Please show your work!

Homework Answers

Answer #1
Solution:
Current stock price   $ 29.59
Ex-dividend price $ 25.73
Working Notes:
Current stock price =Market value of Equity / No. of shares outstanding currently.
=$651,000/22,000
=$29.5909
=$29.59
When company declared a 15 percent stock dividend
Its total outstanding shares will be increased by 15% and becomes = 22,000 x (1.15) = 25,300 shares
Ex-dividend price =Market value of Equity / No. of shares outstanding currently after stock dividend.
=$651,000/25,300
=$25.731225
=$25.73
Please feel free to ask if anything about above solution in comment section of the question.
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