R Co. has outstanding 100 million shares, $1 par common stock, selling for $8 per share. After a 1 for 4 reverse stock split:
A) R would have 25 million shares, $4 par per share.
B) The market price per share would be about $2.
C) Fractional shares would be issued.
D) Retained earnings would be reduced.

Question

Quizplus · Accepted Answer

After a 1 for 4 reverse stock split, the number of outstanding shares would be reduced to 25 million shares (100 million shares divided by 4). The par value per share would increase to $4 (1 multiplied by 4). The market price per share would remain the same at $8 since the total value of the company has not changed. Fractional shares would not be issued since the reverse stock split would only reduce the number of shares to a whole number. Retained earnings would not be affected by the reverse stock split.

R Co Has Outstanding 100 Million Shares, $1 Par Common Stock