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Unformatted text preview: res ÷ 149.5 million shares
outstanding), and Mr. Jones' investment was worth $46 million (1 million shares $46 market value per
share). After the stock dividend, Mr. Jones would own 2,000,000 shares, and the total number of shares
outstanding would increase to 299 million shares. Thus, Mr. Jones would still own .669% of Hershey (2
million ÷ 299 million shares outstanding). Because the market price would be expected to drop to $23 per
share [see part (c)], Mr. Jones' investment would still be worth approximately $46 million. Thus, neither the
percentage of shares owned nor the total value of an equity investment would be expected to be affected
by a stock dividend, provided that the market price decreases proportionately to the increase in the
number of shares outstanding. e. As demonstrated in part d, a stock dividend does not represent an economic exchange between a
corporation and its shareholders. A stock dividend merely splits the shareholders’ interests into smaller
pieces. The total value of the company and its assets and liabilities remain unchanged. f. A company m...
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