What Will the Market Price of the Share Be After a 20% Stock Dividend?

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In summary, a business is an organization that produces goods or services, while a share represents a portion of ownership in a business. Shares work by allowing individuals to invest in a company and potentially earn a profit through dividends and capital appreciation. Other benefits of owning shares include voting rights and diversification of investment portfolio. The stock market is where shares are bought and sold, and its value is influenced by various factors. While shares can be a risky investment, they also have the potential for high returns and it is important for investors to do their research and diversify their investments.
  • #1
monsmatglad
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29. A firm has 1 million shares outstanding with a par value of 100 kroner. Retained
earnings are 200 million kroner and the current share price is 325 kroner. The firm
undertakes a 20% stock dividend.

What do you expect the market price of the share to be immediately after the stock
dividend?
(a) 265.13 kroner
(b) 270.83 kroner
(c) 325.00 kroner
(d) 390.00 kroner
(e) I choose not to answer
could someone point me in the right direction here?

mons
 
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  • #2
think about if the stock dividend would change the aggregate value of all the outstanding shares
 

1. What is the difference between a business and a share?

A business refers to a company or organization that produces goods or services, while a share refers to a portion of ownership in a business. Essentially, a share represents a stake in the profits and assets of a business.

2. How do shares work?

Shares work by allowing individuals to invest in a company and become partial owners. When a company performs well, the value of its shares increases, and shareholders can earn a profit by selling their shares at a higher price. On the other hand, if a company performs poorly, the value of its shares may decrease, resulting in a loss for shareholders.

3. What are the benefits of owning shares?

Owning shares can provide several benefits, such as potential for financial gain through dividends and capital appreciation, voting rights in company decisions, and diversification of investment portfolio.

4. What is the stock market and how does it relate to shares?

The stock market is a platform where shares of publicly traded companies are bought and sold. It allows investors to buy and sell shares easily and provides a way for companies to raise capital. The value of shares is influenced by various factors, such as company performance, economic conditions, and investor sentiment.

5. Are shares a risky investment?

Shares can be a risky investment as their value can fluctuate greatly depending on market conditions and company performance. However, they also have the potential for high returns. It is important for investors to do thorough research and diversify their investments to mitigate risk.

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