Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

John is a shareholder of Carson Construction (Carson) and owns 100 shares of Carson. The board of directors of Carson recently announced a 20% stock

John is a shareholder of Carson Construction (Carson) and owns 100 shares of Carson. The board of directors of Carson recently announced a 20% stock dividend to all shareholders on record as at 30 Sept 2021. Assuming that Carson's current stock price is RM30 per share and there are 1,000,000 shares of stock in issue of RM1 par value, and its earnings per share (EPS) for last year was RM1.50.

Required: (i) Calculate the market capitalisation and earnings per share of Carson before and after the stock dividend. (5 marks)

(ii) Based on the calculations in part (a) (i) above, explain the impact of the stock dividend on John's ownership position and the market price of his stock investment in the company.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Analysis for Financial Management

Authors: Robert Higgins

11th edition

77861787, 978-0077861780

More Books

Students also viewed these Finance questions