Question

A company declared a 5 for 3 stock split when the stock was selling at $250...

A company declared a 5 for 3 stock split when the stock was selling at $250 per share. Prior to the split, the firm had $50 million in common stock with a $6 par. Which of the following answers would be correct after the split?

Common stock = $83.35 mil

Stock price = $417

Par value = $3.60

Stock price = $150

Common Stock = $30 mil

Stock price = $150

Par value = $10

Stock price = $41.70
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Homework Answers

Answer #1

The share split refers to a scenario when the company increases the number of shares in order to decrease the price per share.

Share Price after Stock Split = Share Price Before stock split * ( Number of share per lot before Stock split / Number of share per lot after stock split)

= 250 * ( 5 / (5+3))

= 250 * (5/8)

= $150

Total Number of shares =  Number of share before split * ( Number of share per lot before Stock split / Number of share per lot after stock split)

= 50 * (( 5 / (5+3))

= 50 * (5/8)

= 83.5 Millions

Face Value = Face value per share before split * ( Number of share per lot before Stock split / Number of share per lot after stock split)

= 6 * (( 5 / (5+3))

= 3.75 Per share

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