Question

Wilson Pharmaceuticals’ stock has done very well in the market during the last three years. It has risen from $35 to $60 per share. The firm’s current statement of stockholders’ equity is as follows:

   

Common stock (3 million shares issued at par value of $10 per share)	$	30,000,000
Paid-in capital in excess of par		12,000,000
Retained earnings		48,000,000
Net worth	$	90,000,000

a-1. How many shares would be outstanding after a two-for-one stock split? (Do not round intermediate calculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").)
  

Number of shares

million

a-2. What would be its par value? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

Par value

b-1. How many shares would be outstanding after a three-for-one stock split? (Do not round intermediate calculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").)
  

Number of shares

million

b-2 What would be its par value? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

Par value

c. Assume that Wilson earned $12 million. What would its earnings per share be before and after the two-for-one stock split? After the three-for-one stock split? (Do not round intermediate calculations and round your answers to 2 decimal places.)

EPS before
EPS after 2-for-1 split
EPS after 3-for-1 split

d. What would be the price per share after the two-for-one stock split? After the three-for-one stock split? (Assume that the price-earnings ratio of 15.00 stays the same.) (Do not round intermediate calculations and round your answers to 2 decimal places.)
  

Price after 2-for-1 split
Price after 3-for-1 split

Answer 1

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