Asked by Juliet Sebastian on Apr 28, 2024
Verified
Ryan's Auto Parts has 200,000 shares of stock outstanding with a par value of $1 per share and a market value of $10 a share. The company has retained earnings of $86,000 and paid in surplus of $285,000. The company just announced a 2-for-5 reverse stock split. What will the par value per share be after the split?
A) $0.20
B) $0.40
C) $1.00
D) $2.50
E) $5.00
Reverse Stock Split
A corporate action where a company decreases the number of its outstanding shares to increase the share price without altering the company's market capitalization.
Par Value
The nominal or face value of a bond, share, or other financial instruments, which does not necessarily reflect its market value.
- Examine the economic consequences stemming from particular business maneuvers, such as share divisions and alterations in dividend distributions.
Verified Answer
SS
Sharoon SalimApr 29, 2024
Final Answer :
D
Explanation :
In a 2-for-5 reverse stock split, for every 5 shares you own, you get 2 shares in return. This does not affect the par value of the shares; it remains $1.00 per share.
Learning Objectives
- Examine the economic consequences stemming from particular business maneuvers, such as share divisions and alterations in dividend distributions.