Question

# The market value balance sheet for Oracle Manufacturing is shown here. The company has declared a...

The market value balance sheet for Oracle Manufacturing is shown here. The company has declared a stock dividend of 10 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 \$ 96,000 Debt \$ 155,000 Fixed assets 800,000 Equity 741,000 Total \$ 896,000 Total \$ 896,000 There are 31,000 shares of stock outstanding.

What is the current share price?

What will the ex-dividend price be?

(a)-Current Share Price

Current Share Price = Total Market Value of Equity / Number of common shares outstanding

= \$741,000 / 31,000 Shares outstanding

= \$23.90 per share

(b)-Ex-dividend price

The new number of common shares outstanding after the company has declared a stock dividend of 10 percent = Number of common shares outstanding x 110%

= 31,000 Shares x 110%

= 34,100 Shares outstanding

Therefore, the Ex-dividend price = Total Market Value of Equity / Number of common shares outstanding

= \$741,000 / 34,100 Shares outstanding

= \$21.73 per share