Question

The market value balance sheet for Globe Manufacturing is shown here. There are 15,000 shares of stock outstanding. The company has declared a 20 percent stock dividend. The stock goes ex dividend tomorrow. What will the new stock price be?

Market value balance sheet Cash $80,000 Debt $100,000 Fixed Assets 570,000 Equity 550,000 Total $650,000 Total $650,000

Group of answer choices $25.46 $30.56 $33.05 $38.24 None of the above is correct.

Answer 1

Given,
Stock dividend	20%
Market value of equity	$550,000
Number of shares outstanding	15000
Therefore,
Price before dividend= Market value of equity/Number of shares outstanding
	550000/15000
	$36.67
Price after dividend= Price before dividend/(1+rate of dividend)
	36.67/(1+20%)
	$30.56
Answer: Option B