Asked by TRISHA MARTINEZ on Apr 26, 2024
Verified
Mario's has 18,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $33 a share. The firm just announced a 5-for-3 stock split. What will the par value of the stock be after the split?
A) $0.40
B) $0.60
C) $1.00
D) $1.30
E) $1.50
Stock Split
A corporate action that increases the number of a corporation's outstanding shares by dividing each share, which in turn reduces the price per share.
Par Value
The face value of a bond or stock as stated by the issuing company, which does not necessarily reflect its market value.
- Investigate the monetary results of distinct corporate moves, including the division of stocks and adjustments in dividend payouts.
Verified Answer
TC
Tanner CereghinoApr 30, 2024
Final Answer :
B
Explanation :
In a stock split, the par value of the stock is adjusted in direct proportion to the split ratio. Here, the split is 5-for-3, meaning each 3 shares will now become 5 shares. To find the new par value, divide the old par value by the split ratio (5/3). $1.00 / (5/3) = $0.60.
Learning Objectives
- Investigate the monetary results of distinct corporate moves, including the division of stocks and adjustments in dividend payouts.