Maggie owns 100 shares of FloorMart Inc. The firm has a semiannual dividend policy of $0.75 per share or the option to reinvest the cash dividends into additional shares of company stock
If the stock is selling for $55.00 per share ex-dividend, how many shares of stock will Maggie receive in the next dividend period if she chooses the dividend reinvestment plan?
A) 0.73 shares
B) 1.36 shares
C) 7.33 shares
D) 13.64 shares
Answer: B
Explanation: B) Cash value of the dividends = the per share dividend × the number of shares owned = $0.75 × 100 shares = $75.00. At $55 per share Maggie can purchase $75/$55 = 1.36 shares.
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