A man owned 75 shares of stock worth $50 each. The corporation declared a dividend of 8 percent payable in stock. How many shares did he then own? 81 shares but how?
value of original stock = 75(50) = 3750
after increase of 8%, the value is 3750(1.08)
= 4050
number of shares = 4050/50 = 81
To determine the number of shares the man owns after the dividend is paid in stock, we need to follow these steps:
1. Calculate the total dividend amount: Multiply the number of shares owned (75) by the value of each share ($50), and then multiply by the dividend rate (8%) in decimal form.
Dividend amount = 75 shares * $50/share * 0.08 = $300
2. Determine the number of dividend shares: Divide the dividend amount ($300) by the value of each share ($50).
Number of dividend shares = $300 / $50/share = 6 shares
3. Add the number of dividend shares to the initial number of shares owned to get the final number of shares:
Final number of shares = Initial number of shares + Number of dividend shares
Final number of shares = 75 shares + 6 shares = 81 shares
Therefore, the man now owns 81 shares after the dividend is paid in stock.