If a corporation declares a 10% stock dividend, then the share price of the stock will...

If a corporation declares a 10% stock dividend, then

		the share price of the stock will most likely decline by about 9%.
		the share price of the stock will most likely increase by about 10%.
		the share price of the stock will most likely remain unchanged.
		each shareholder will get a 10% cash rebate off his or her next round lot purchase of the stock.

Expert Solution

When the corporation is declaring a 10% stock dividend, it will be in that shareholders will be gaining an additional stock for 10 stock already held in his portfolio, so the overall share price of the company is going to decrease because of presence of an additional stock in the portfolio.

Hence, If the corporation is declaring a 10% stock dividend, then, the price of this stock will most likely declined by about 9% because of increase in the overall number of shares.

Correct answer will be option (A) the share price of the stock will most likely decline by about 9%.

jeff jeffy answered 2 years ago

WE COMPANY declares a 10% stock dividend at the current market price P80/share. The following are...

WE COMPANY declares a 10% stock dividend at the current market price P80/share. The following are the details of MY COMPANY stockholders section: Preferred Stock P 500,000.00 Common Stock (100,000 shares at P50 par) 5,000,000.00 Paid-in Capital in Excess of Par 2,000,000.00 Retained Earnings 1,000,000.00 Total Stockholders’ Equity 8,500,000.00 WE COMPANY want to know the effect of stock dividends on its Financial Statement. The company hire you as a financial consultant to explain to the BOD...

Exhibit 11-2 On January 31, the board of directors declares a stock dividend of 10% to...

Exhibit 11-2 On January 31, the board of directors declares a stock dividend of 10% to be issued on February 15 to stockholders of record on February 5th. The corporation currently has 500,000 shares of $2 par stock outstanding and a market price of $10/share. ____ 23. Refer to Exhibit 11-2. How many additional shares of stock are issued? a. 500,000 b. 5,00,000 c. 50,000 d. Zero ____ 24. Refer to Exhibit 11-2. What is the journal entry on the...

Flounder Corporation has outstanding 517,000 shares of $10 par value common stock. The corporation declares a...

Flounder Corporation has outstanding 517,000 shares of $10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is $62 per share. Prepare the journal entries for Flounder Corporation for both the date of declaration and the date of distribution. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)...

Tamarisk Corporation has outstanding 125,000 shares of $10 par value common stock. The corporation declares the...

Tamarisk Corporation has outstanding 125,000 shares of $10 par value common stock. The corporation declares the following stock dividends when the fair value of the stock is $65 per share. Prepare the journal entries for Tamarisk Corporation for both the date of declaration and the date of distribution. Stock dividend is 15% Stock dividend is 70%

A share of preferred stock pays a quarterly dividend of $1.00. If the price of the...

A share of preferred stock pays a quarterly dividend of $1.00. If the price of the stock is $50, what is the effective annual (not nominal) rate of return on the preferred stock?

Troutman Corporation has 7,000 shares of common stock outstanding. It declares a $1 per share cash...

Troutman Corporation has 7,000 shares of common stock outstanding. It declares a $1 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Find the price for a stock given that the next dividend is $2.38 per share, the...

Find the price for a stock given that the next dividend is $2.38 per share, the required return is 9.6%, and the growth rate in dividends is 1.3% per year.

You consider buying a share of stock at a price of $10. The stock is expected...

You consider buying a share of stock at a price of $10. The stock is expected to pay a dividend of $1.00 next year, and your advisory service tells you that you can expect to sell the stock in 1 year for $12. The stock's beta is 1.0, rf is 16%, and E[rm] = 26%. What is the stock's abnormal return?

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on...

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 27,000, $18 par, common shares. The market price of the common stock is $47 on this date. Required: 1. 2. & 3. Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Stock Dividends On August 1, 2020, Perkins declares a 15% Common Stock dividend. The market (fair)...

Stock Dividends On August 1, 2020, Perkins declares a 15% Common Stock dividend. The market (fair) value of the stock on August 1, 2020, is $30 per share. August 15, 2020, is the date of record. The stock dividend will be distributed on August 31, 2020. Instructions: (a) Prepare all required journal entries for August 1, 15, and 31, 2020. If no journal entry is required, state NA. (b) Assume that Perkins declares a 30% Common Stock dividend instead of...

Question