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xyz inc. currently has 5 million shares outstanding at a market price of 13 per share...

xyz inc. currently has 5 million shares outstanding at a market price of 13 per share . xyz inc declares a 1 for 4 stock dividend. how many shares will be outstanding after the dividend is paid? after the stock dividend what is the new price per share and what is the total market value of the firm?

Solutions

Expert Solution

Shares outstanding after the dividend is paid = 5 + (5*1/4) = 6.25 million shares.

Total Market Value = Number of share * Price of per share

                              =$ (5 * 13) million

                              = $ 65 million

New price per share = Total Market Value / Total number of share outstanding

                                 =65 / 6.25

                             = $ 10.4/ share


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