Assuming no other influence on share price, what is the expected share price following the scrip dividend?

CORRECT TEXT

A listed company follows a policy of paying a constant dividend.

The following information is available:

• Issued share capital (nominal value $0.50) $60 million

• Current market capitalisation $480 million

The shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors wish to retain as much cash as possible to fund new investments. They therefore plan to announce a 1-for-10 scrip dividend to replace the usual cash dividend.

Assuming no other influence on share price, what is the expected share price following the scrip dividend?

Give your answer to 2 decimal places.

$ ?

View Answer

Answer: 3.64, 3.63, 3.65