South Shore Limited has 14,500 shares of stock outstanding with a par value of $1 per share and a market price of $54.10 a share. The firm just announced a stock split of seven-for-two. What will be the par value of the stock after the split?
A) $.29
B) $.58
C) $1.00
D) $7.00
E) $3.50

Question

Quizplus · Accepted Answer

In a seven-for-two stock split, each shareholder receives seven new shares for every two shares they hold. This increases the number of shares outstanding but does not change the total value of the company. The par value of the stock is adjusted so that the total par value remains the same. The original par value is $1 per share. After the split, the new par value is calculated as $1 * (2/7) = $0.29.

South Shore Limited Has 14,500 Shares of Stock Outstanding with a Par