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Outpost Has 2 Million Shares of Common Stock Outstanding; Net

question 110

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Outpost has 2 million shares of common stock outstanding; net income is $300,000; the P/E ratio is 9; and management is considering an 18% stock dividend.What will be the expected effect on the price of the common stock? If an investor owns 300 shares in the company,how does this change his total value? Explain.


Definitions:

Bath Sponges

Natural or synthetic sponges used for cleansing the body; natural ones are harvested from the ocean and belong to a simple, multicellular organism group.

Silica

A hard, unreactive, colorless compound that occurs as the mineral quartz and as a principal constituent of sandstone and other rocks.

Calcium Carbonate

A chemical compound used as a dietary supplement or antacid; it's also the main component of limestone.

Spongin

A fibrous protein that makes up the skeleton of many sponges.

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