A corporation has 50,000 shares of $28 par stock outstanding that has a current market value of $150 per share. If the corporation is

A corporation has 50,000 shares of $28 par stock outstanding that has a current market value of $150 per share.
If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately ____.

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  1. Answer:

    $37.50

    Explanation:

    For us to get the market value of the stock split, let’s do the following calculation.

    Current market value = $150

    Therefore, to get market value of the stock fall is;

    = Current market value / four /one

    = $150 per share / 4 / 1

    = $150 per share / 4

    = $37.50

    What we did is to divide the current market value by the four for one stock split ratio in doing so, we can get the get the correct market value. The 4-for-1 stock split that was show, is the ratio required which was given in the question.

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