Question

Clean Company is a little short of cash so they are planning to do an 8% stock dividend instead. Callie has 300 shares of Clean and they are currently selling at $55.00 per share. Clean has a total of 20,000 shares outstanding.Before the stock dividend, what is the total value of Callie’s investment in Clean Company? ___________________After the stock dividend, Callie will have ______________ shares.After the stock dividend, the shares will be worth ___________ per share.After the stock dividend, the total value of Callie’s investment in Clean Company will be _____________________.

Answer 1

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Answer:

a) Value of investment = 300 shares * $55 = $16500
b) Stock dividend = Outstanding shares * % of stock dividend = 20000*8% = 1600 shares
% of holding of Callie = 300/20000 = 0.015
Number of shares ater stock dividend = 1600 shares * 0.015 = 24 shares
c) Stock dividend will not increase the market price of the share. So the after stock dividend, shares will be worth = $55 per share
d) Value of investment = (300+24)*$55 = $17820