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Suppose you own 5% of Bentley Corporation's 400,000 outstanding common shares
Suppose you own 5% of Bentley Corporation's 400,000 outstanding common shares. The stock was trading for $180 per share before Bentley executives announced a 50% stock dividend. After the stock dividend, you will own shares worth per share. 30,000: $120 20,000: $180 13,333: $270 30,000: $180 20,000: $120
Expert Solution
Correct option: 30,000, $120
Note : investor A owns 5% of Bentley corporation's 400,000 outstanding shares
Investor A holds = 400,000*5% = 20,000 shares
Company announced 50% stock dividend
It means investor A gets 20,000*50%= 10,000 shares as stock dividend .
Total shares own my investor A after stock dividend is 30,000 shares .
Before stock dividend stock price= $180
Total value of stock held by investor A before stock dividend= 20,000 shares *$180= $3,600,000
Because of stock dividend, total number of shares increased , it will reduce the stock price , while the value of the company remains unchanged
Therefore:
Total stock value : $3,600,000
Total shares :30,000
Stock price after stock dividend= $3,600,000/30,000= $120
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