Tangshan Mining has 100,000 shares outstanding and just declared a 20% stock dividend. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock dividend, the firm's shares should trade at ________ per share.
A) $42.00
B) $41.67
C) $46.33
D) $50.00

Question

Quizplus · Accepted Answer

After the stock dividend, the firm will have issued an additional 20,000 shares (20% of 100,000). The total number of shares outstanding will be 120,000 (100,000 + 20,000).

To find the new price per share, we divide the total value of the shares by the new total number of shares outstanding:

Total value before dividend = $50.00 x 100,000 = $5,000,000 
Total value after dividend = $5,000,000 
New price per share = $5,000,000/120,000 = $41.67

Therefore, the correct answer is B.

Tangshan Mining Has 100,000 Shares Outstanding and Just Declared a 20