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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!

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.