Asked by Kevin Nguyen on Jul 21, 2024
Verified
The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 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) 62,500 shares
B) 75,000 shares
C) 83,333 shares
D) 175,000 shares
E) 208,333 shares
Stock Split
A corporate action that increases the number of shares outstanding by issuing more shares to current shareholders.
Market Price
The present price for which a service or asset is available for purchase or sale in a market.
Shares Outstanding
The total number of a company’s shares that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.
- Calculate the effects of stock splits on the number of shares outstanding.
Verified Answer
AG
Anthony GumboJul 24, 2024
Final Answer :
E
Explanation :
A 5-for-3 stock split means that for every 3 shares of stock, shareholders will receive an additional 2 shares, thus increasing the total number of shares by 5/3 or 1.67 times the original amount. So, after the stock split, the number of outstanding shares would be: 125,000 x 1.67 = 208,333 shares. Therefore, the correct answer is E.
Learning Objectives
- Calculate the effects of stock splits on the number of shares outstanding.