Question
PPP Limited's stock is currently trading at $23 per share. PPP is considering a 15 percent stock dividend. Equity account are shown below: common stock
PPP Limited's stock is currently trading at $23 per share. PPP is considering a 15 percent stock dividend. Equity account are shown below:
common stock (585,000 shares) $585,000
retained earnings $3,720,000
total owner's equity $4,305,000
a) how many new shares will be distributed as a result of the stock dividend?
b) show how the equity accounts will change as a result of the stock dividend?
c) assuming a perfect market, what will the share price be after the stock dividend?
d) suppose the company instead decides on a three-for-one stock split. the firm's 80 cents per share cash dividend on the new (post-split) shares represents an increase of 5 percent over last year's dividend on the pre-split stock. what effects does this have on the equity accounts? what was last year's dividend per share?
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