The Olive Vase has 48,000 shares of stock outstanding with a par value of $1 per share and a market value of $13 a share. The company just announced a reverse stock split of three-for-seven. Currently, you own 400 shares of this stock. What will be the total value of your shares after the reverse stock split?

Question

Quizplus · Accepted Answer

The reverse stock split of 3-for-7 means that for every 7 shares that a shareholder currently holds, they will receive 3 shares in return. 
So, for 400 shares before the split, the new number of shares you will hold after the split will be: 
400/7 * 3 = 171.43 (rounded to the nearest whole number = 171). 
The par value of the shares is still $1 per share, so the total value of your shares after the split will be: 
171 * $13 = $2,223. 
Therefore, the correct answer is C, $5,200, which represents the total value of your 400 shares before the split ($400 * $13 = $5,200).

The Olive Vase Has 48,000 Shares of Stock Outstanding with a Par