Question

If Mainway Toy Company declares a 4-for-1 stock split, the price of the company’s stock after the split, assuming that the total value of the firm’s stock remains the same after the split, will be$380.00 Scorecard Athletics Corp. is one of Mainway’s leading competitors. Scorecard’s market intelligence research team shares Mainway’s plans of announcing a stock split, influencing the distribution policy makers. Consequently, executives at Scorecard decide to offer stock dividends to its shareholders. Scorecard currently has 1,900,000 shares of common stock outstanding. If the firm pays a 7% stock dividend, what will be the total number of shares outstanding after the stock dividend?

Answer 1

Scorecard Athletics Corp.

The total number of shares outstanding after the stock dividend is:

Step-by-step explanation:

a) Data:

Common stock outstanding before stock dividend = 1,900,000

Stock dividend paid = 7% = 133,000 (1,900,000 * 7%)

Outstanding stock = Common stock outstanding before stock dividend Plus Stock dividend paid

= 2,033,000 (1,900,000 + 133,000)

Scorecard's stock dividend is a form of dividend that is paid with stock of shares. It is usually given to stockholders as a compensation, especially when the firm does not have enough cash and with the company's shares trading at high prices. Stock dividends increase the number of common stock shares outstanding and the profitability indexes based on this number will decrease accordingly, especially the Earnings Per Share.