Asked by Alyssa Clark on Jun 18, 2024
Verified
Miester & Miester has 75,000 shares of stock outstanding at a market price of $87 a share. The company has just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split?
A) 45,000 shares
B) 62,500 shares
C) 90,000 shares
D) 105,500 shares
E) 125,000 shares
Stock Split
A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the overall market capitalization remains the same.
Market Price
The prevailing cost at which you can buy or sell a service or asset in the market.
Shares Outstanding
Shares Outstanding refer to all shares currently owned by shareholders, company insiders, and investors in the public domain, representing the total equity ownership of a company.
- Grasp the consequences of stock splits and reverse stock splits on the equity of shareholders and the volume of shares available.
- Compute the consequences of stock splits and reverse stock splits.
Verified Answer
GL
Gurleen LalliJun 19, 2024
Final Answer :
E
Explanation :
In a 5-for-3 stock split, for every 3 shares an investor holds, they will receive 5 shares in return. To find the new number of shares outstanding, divide the original number of shares by 3, then multiply by 5. So, 75,000÷3×5=125,00075,000 \div 3 \times 5 = 125,00075,000÷3×5=125,000 shares.
Learning Objectives
- Grasp the consequences of stock splits and reverse stock splits on the equity of shareholders and the volume of shares available.
- Compute the consequences of stock splits and reverse stock splits.