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Lisa recently purchased 80 shares of a company for $8800 ($110 per share). The company has been doing well. Given the success of the company,

Lisa recently purchased 80 shares of a company for $8800 ($110 per share). The company has been doing well. Given the success of the company, her shares are now worth $190 each. This year, she received a dividend of $880, which she reinvested to purchase 5 shares of stock in the company. How does Lisas decision to reinvest her dividend (buy more stock) affect her total basis in the investment?

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Lisas total basis is not affected by reinvesting her dividends.

Lisas total basis decreased to $7920 and then increased back to $8800.

Lisas total basis increased from 80 shares to 85 shares.

Lisas total basis invested increased from $8800 to $9680.

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