Wisniewski Inventions has 560,000 shares of stock outstanding at a market price of $3.90. If the ﬁrm declares a 2-for-7 reverse stock split, the company will have ____ shares outstanding at a
Market price of:

Question

Quizplus · Accepted Answer

To find the new number of shares outstanding after the reverse stock split, we need to divide the current number of shares by the split ratio (2/7):

New shares outstanding = 560,000 / (2/7) = 1,960,000

To find the new market price per share, we need to multiply the current market price by the split ratio:

New market price = $3.90 x (2/7) = $1.11

Therefore, the correct answer is B: 160,000 shares outstanding at a market price of $13.65. This is not a possible outcome of a 2-for-7 reverse stock split. The correct answer is actually 1,960,000 shares outstanding at a market price of $1.11.

Wisniewski Inventions Has 560,000 Shares of Stock Outstanding at a Market