Asked by Yakelin Zamora on May 17, 2024
Verified
Numberg Corporation has a stock price of $2.5. It is expected that the company will announce a 1 for 8 reverse split. Given this information, determine the price of the stock after the reverse split.
A) $0.31
B) $1.25
C) $20.00
D) $25.00
E) $50.00
Reverse Split
Procedure where a firm’s number of shares outstanding is reduced.
Stock Price
The cost of purchasing a single share of a particular company's stock on the open market, fluctuating based on demand, market conditions, and company performance.
Shares Outstanding
Shares outstanding refer to the total number of shares of a company's stock currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.
- Investigate the effects of stock splits and stock dividends on a corporation's equity and values per share.
- Comprehend and determine the share price prior to and subsequent to diverse corporate finance operations.
Verified Answer
SW
Sareena WaskowiakMay 23, 2024
Final Answer :
C
Explanation :
In a 1 for 8 reverse split, each shareholder ends up with 1 share for every 8 shares they previously held. The price of the stock is adjusted so that the value of the shareholder's investment remains the same. Therefore, the new price is $2.5 * 8 = $20.00.
Learning Objectives
- Investigate the effects of stock splits and stock dividends on a corporation's equity and values per share.
- Comprehend and determine the share price prior to and subsequent to diverse corporate finance operations.