Question

F Co. declares a 5% stock dividend. If the market price at declaration is $12 per share, a shareholderwith 110 shares likely would receive:

A) $60
B) $66
C) $132
D) $120

Answer 1

A shareholder with 110 shares would likely receive 5 new shares from a 5% stock dividend, which at a market price of $12 per share amounts to $60 in value.

Step-by-step explanation:

When F Co. declares a 5% stock dividend, a shareholder with 110 shares will receive additional shares rather than cash. To calculate the number of shares they would receive: 110 shares × 5% = 5.5 shares. Since companies typically don't issue fractions of shares in stock dividends, this number is usually rounded down to the nearest whole number, so the shareholder would likely receive 5 additional shares. If we then multiply these 5 new shares by the market price per share at declaration, which is $12, we get: 5 shares × $12/share = $60. Therefore, the correct answer is A) $60, as this is the market value of the additional shares the shareholder would receive from the stock dividend.