Final answer:
To calculate the new cost basis per share after a 10% stock dividend, divide the total cost of purchase by the new total number of shares. In this case, the new cost basis per share is $45.45 and she now has 110 shares.
Step-by-step explanation:
To determine the new cost basis per share, we need to account for the stock dividend received. A stock dividend is when a company distributes additional shares of stock to its shareholders.
In this case, your client received a 10% stock dividend. This means that for every 10 shares of ABC stock she owned, she received 1 additional share. Since your client initially bought 100 shares, she would receive 10 additional shares as a dividend.
To calculate the new cost basis per share, we divide the total cost of purchase by the new total number of shares. The initial purchase cost was $50 per share, and she received 10 additional shares, so the new total shares she now has is 110.
Cost basis per share = Total cost of purchase / Total number of shares
Cost basis per share = (100 shares x $50 per share) / 110 shares = $45.45 per share
Therefore, her new cost basis per share is $45.45.
As for the number of shares she now has, it would be the sum of the initial shares and the additional shares received as a dividend. So, she now has 100 + 10 = 110 shares of ABC stock.