Asked by Brittney Kersey on Jun 18, 2024
Verified
The common stock of Checkers, Inc. is selling for $40 a share. The par value per share is $1. Currently, the firm has a total market value of $78,600. How many shares of stock will be outstanding if the firm does a 5-for-3 stock split?
A) 1,179 shares
B) 1,965 shares
C) 2,555 shares
D) 3,275 shares
E) 5,895 shares
Stock Split
A corporate action that increases the number of a company’s outstanding shares by dividing each share, which in turn reduces the price per share.
Par Value
The face value of a bond or the stock value stated in the corporate charter, which is the legal capital per share.
Market Value
The current quoted price at which an asset or service can be bought or sold in an open market.
- Appraise the newly adjusted price of stocks and the stake of shareholders following specific corporate maneuvers like stock dividends, splits, and reverse splits.
Verified Answer
KJ
Kiran JaiswalJun 23, 2024
Final Answer :
D
Explanation :
The firm's total market value is $78,600, and with the stock currently selling for $40 a share, the number of shares outstanding before the split is $78,600 / $40 = 1,965 shares. After a 5-for-3 stock split, the number of shares will increase to (5/3) * 1,965 = 3,275 shares.
Learning Objectives
- Appraise the newly adjusted price of stocks and the stake of shareholders following specific corporate maneuvers like stock dividends, splits, and reverse splits.