Current market price per share of Sahara Company is Rs. 300. If company declares 20 percent stock dividend, calculate adjusted market price per share after stock dividend. GROUP: B Descriptive…

Solution:

1. Market Value Before Dividend (MV₀): Current market price per share = Rs. 300

2. Stock Dividend (20%): New shares issued per old share = $20\%\times 1=0.20$ shares Total shares after dividend = $1+0.20=1.20$ shares

3. Total Market Value (MV): $\text{MV}={\text{MV}}_0\times \text{Total Shares}=300\times 1.20=\text{Rs. 360}$

4. Adjusted Market Price per Share (P₁): $P_1=\frac{\text{MV}}{\text{Total Shares}}=\frac{360}{1.20}=\text{Rs. 300}$

Correction: The adjusted market price per share remains Rs. 300 because the total market value is conserved. However, if the question expects a theoretical ex-dividend price adjustment (assuming market value is split among more shares), the calculation would be:

$$P_1=\frac{300}{1.20}=\text{Rs. 250}$$

Final Answer: The adjusted market price per share after a 20% stock dividend is Rs. 250.