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A corporation, which had 12,000 shares of common stock outstandingdeclared a 6-for-1 stock split. What will...

A corporation, which had 12,000 shares of common stock outstandingdeclared a 6-for-1 stock split. What will be the number of shares outstanding after the split? ) If the common stock had a market price of $240 per share before the stock split, what would be an approximate market price per share after the split?
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Answer #1

Solution:

a.The number of shares outstanding after the split:

As per the information given in the question we have

No. of shares outstanding before the split = 12,000 shares

Stock split ratio = X for Y = 6 for 1

The formula for calculating the number of shares outstanding after the split is

= No. of shares outstanding before the split * ( X / Y )

= 12,000 * ( 6 / 1 )

= 72,000 shares

The number of shares outstanding after the split = 72,000 shares

b. Approximate market price per share after the split:

As per the information given in the question we have

Market price before the split = $ 240 per share

Stock split ratio = X for Y = 6 for 1

The formula for calculating the approximate market price per share after the split is

= Market price before the split * ( Y / X )

= $ 240 * ( 1 / 6 )

= $ 40

The approximate market price per share after the split is = $ 40

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