If a company declares a 20% stock dividend and a customer holds 1,000 shares valued at $50.00, what will be the new number of shares and price per share after the dividend is paid?

When a company declares a 20% stock dividend, it means that shareholders will receive additional shares equivalent to 20% of the shares they already hold. In this case, the customer owns 1,000 shares. To calculate the number of additional shares received from the dividend, you multiply the existing number of shares by the dividend percentage:

1,000 shares × 20% = 200 additional shares.

After the stock dividend is paid, the total number of shares the customer will own is the original shares plus the additional shares:

1,000 shares + 200 shares = 1,200 shares.

Next, the price per share needs to be adjusted after the stock dividend is issued. Since the total market value of the shares does not change due to the stock dividend, the total initial value of the shares can be calculated as follows:

1,000 shares × $50.00 = $50,000.

Now, to determine the new price per share after the stock dividend, we divide the unchanged total market value by the new total number of shares:

$50,000 ÷ 1,200 shares = approximately $41.67 per share.

This calculation shows that after the company issues a 20% stock dividend, the new