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Question
Concentric Corporation has 10 million shares of stock outstanding. Concentric's after-tax profits are $140 million and the corporation's stock is selling at a price-earnings multiple of 18, for a stock price of $252 per share. Concentric's management issues a 40% stock dividend. What is the effect on an investor who owns 100 shares of Concentric before the dividend if Concentric's price-earnings multiple remains the same after the dividend is paid?A) The investor will own 140 shares worth $25,200.
B) The investor will own 140 shares worth $35,280.
C) The investor will own 100 shares worth $25,200.
D) The investor will own 100 shares worth $35,280.
Answer
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