The board of directors of Complex Computers has decided to declare a 20 per- cent stock dividend. The company's common stockholders' equity is as follows:
Pre-Stock Dividend Common Stockholders' Equity
|
Common stock ($1 par, 100,000 shares)
|
$ 100,000
|
|
Contributed capital in excess of par
|
900,000
|
|
Retained earnings
|
5,000,000
|
|
Total common stockholders' equity
|
$6,000,000
|
The common stock of Complex Computers is currently trading at $80 a share. The company is growing rapidly and has never paid a cash dividend.
a. Show the company's common stockholders' equity after the stock dividend.
b. Calculate the post-stock dividend price of Complex Computers stock, assuming no other changes occur.