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Estimate the value of the investor holdings

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Question - PT Bank GoGo Tbk. has 50 million shares of stocks outstanding. In fiscal year 2020, Bank Gogo's after-tax profits reached IDRlS billion and the firm's stock is trading at a price- earnings multiple of 40, with a stock price ofIDR12,000 per share. During 2020, Bank Gogo management issues a 25% stock dividend since the pandemic crisis and bleak sales have significantly affected Bank Gogo's earnings performance.

Required -

a. Calculate Bank Gogo's earnings per share before and after the stock dividend.

b. Suppose an investor owns 50 board lots of Bank Gogo before the stock dividend. Use the price earnings multiple to estimate the value of the investor's holdings both before and after the dividend.

c. Comment on the results of the stock dividend for current shareholders.

Reference no: EM133118198

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