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The market value balance sheet for Desktop Manufacturing is shown here
The market value balance sheet for Desktop Manufacturing is shown here. The company has declared a 20 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 152,000 $93,000 Debt $ Cash 770,000 Fixed assets Equity 711,000 Total 863,000 $863,000 Total a. There are 28,000 shares of stock outstanding. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What will the ex-dividend price be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Current share price b. Ex-dividend price
Expert Solution
a. Current share price = Total Equity / Share outstanding
= $ 711,000 / 28,000 shares
= $ 25.39
b. Company declared 20 % stock dividend. Number of shares issued as stock dividend = Shares outstanding * 20%
= 28,000 * 20%
= 5600 shares
Total shares outstanding = 28,000 shares + 5600 shares
= 33600 shares
Ex-dividend price = Total equity / Total shares outstanding after dividend.
= $ 711,000 / 33600 shares
= $ 21.16
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