accountingkid
Jan 17, 2012, 12:05 PM
As can be seen, both dividend options are valued at $100 000. Let's look at the effect on total shareholders' equity:
Cipper Corporation Shareholders' Equity
Before Dividend
Cash Dividend
Stock Dividend
Common Shares
$300 000
$300 000
$300 000
Retained Earnings
120 000
20 000
120 000
Total Equity
$420 000
$320 000
$420 000
Book Value per share (Equity / # shares)
$4.20
$3.20
$3.36
Assume that you owned 800 shares in Cipper Corporation, shown under The Effects of Dividends on Shareholders' Equity on the content page. Calculate the amount you would receive from a cash dividend and from a stock dividend. Which would you prefer? Fully explain why.
Cipper Corporation Shareholders' Equity
Before Dividend
Cash Dividend
Stock Dividend
Common Shares
$300 000
$300 000
$300 000
Retained Earnings
120 000
20 000
120 000
Total Equity
$420 000
$320 000
$420 000
Book Value per share (Equity / # shares)
$4.20
$3.20
$3.36
Assume that you owned 800 shares in Cipper Corporation, shown under The Effects of Dividends on Shareholders' Equity on the content page. Calculate the amount you would receive from a cash dividend and from a stock dividend. Which would you prefer? Fully explain why.