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?

Question

Quizplus · Accepted Answer

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.

Mario's Has 18,000 Shares of Stock Outstanding with a Par