Ryan's Auto Parts has 200,000 shares of stock outstanding with a par value of $1 per share and a market value of $10 a share. The company has retained earnings of $86,000 and paid in surplus of
$285,000. The company just announced a 2-for-5 reverse stock split. What will the par value per
Share be after the split?

Question

Quizplus · Accepted Answer

In a 2-for-5 reverse stock split, the number of shares is reduced, and the par value per share increases proportionally. The original par value is $1, and the reverse split ratio is 5/2, so the new par value is $1 * (5/2) = $2.50.

Ryan's Auto Parts Has 200,000 Shares of Stock Outstanding with a Par