Asked by Princess Lockett on May 11, 2024
Verified
Mae's Housewares has 48,000 shares of stock outstanding with a market value of $11 per share. The company has retained earnings of $62,700. The company just announced a 1-for-3 reverse stock split. How many shares of stock will be outstanding after the split?
A) 16,000 shares
B) 24,000 shares
C) 36,000 shares
D) 72,000 shares
E) 144,000 shares
Reverse Stock Split
A reverse stock split is a consolidation of shares that decreases the total number of outstanding shares and increases the share price proportionately.
Market Value
The existing price for buying or selling an asset or service in the marketplace.
Retained Earnings
The portion of a company's profits that are kept and not paid out as dividends to shareholders, often reinvested into the business.
- Apprehend the influence of stock splits and reverse stock splits on the value held by shareholders and the amount of shares on the market.
- Assess the impact of stock splits and reverse stock splits.
Verified Answer
JP
Juliel PelaezMay 14, 2024
Final Answer :
A
Explanation :
In a 1-for-3 reverse stock split, for every 3 shares an investor holds, they are consolidated into 1 share. Therefore, to find the new number of shares outstanding, divide the original number of shares (48,000) by 3, which equals 16,000 shares.
Learning Objectives
- Apprehend the influence of stock splits and reverse stock splits on the value held by shareholders and the amount of shares on the market.
- Assess the impact of stock splits and reverse stock splits.