Question

ABC Company currently has 310,000 shares of stock outstanding that sell for $94 per share. Assume no market imperfections or tax effects exist.

Determine the share price AND new number of shares outstanding in each of the following independent situations: (Do not round intermediate calculations. Round your price per share answers to 2 decimal places, e.g., 32.16, and shares outstanding answers to the nearest whole number, e.g., 32.)

a. ABC has a five-for-three stock split.

b. ABC has a 11 percent stock dividend.

c. ABC has a 39.0 percent stock dividend.

d. ABC has a four-for-seven reverse stock split.

Answer 1

a). New Share Price = Current Stock Price x Ratio of old shares to new shares

= $94 x (3/5) = $56.40

New Shares Outstanding = Current Shares Outstanding x ratio of new shares to old shares

= 310,000 x (5/3) = 516,667

b). New Share Price = Current Stock Price x Ratio of old shares to new shares

= $94 x (1/1.11) = $84.68

New Shares Outstanding = Current Shares Outstanding x ratio of new shares to old shares

= 310,000 x (1.11) = 344,100

c). New Share Price = Current Stock Price x Ratio of old shares to new shares

= $94 x (1/1.39) = $67.63

New Shares Outstanding = Current Shares Outstanding x ratio of new shares to old shares

= 310,000 x (1.39) = 430,900

d). New Share Price = Current Stock Price x Ratio of old shares to new shares

= $94 x (7/4) = $164.50

New Shares Outstanding = Current Shares Outstanding x ratio of new shares to old shares

= 310,000 x (4/7) = 177,143