Question
a firm that earn the opportunity cost of capital

Par value per share was $2, the market value of the stock was $25 per share. Treasury stock was purchased at $10 per share. Board of Directors declared and paid a 10% stock dividend through a new issuance. Before stock dividend: 100,000 shares of stock authorized 75,000 shares of stock issued 40,000 shares of stock outstanding 35,000 shares of treasury stock Par value of the stock-$2 per share o After stock dividend: 100,000 +4,000 79,000 +4,000 44,000 35,000 $2 per share
How the 4000 came from?
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Answer #1
Issued Shares          75,000
Less: Treasury Shares          35,000
Outstanding Shares          40,000
Stock Dividend
(40000*10%)
           4,000

If the company is holding Treasury stock than these shares are not eligible for any Cash dividend or Stock Dividend.


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