Michael's Boating Supplies has 150,000 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 $76,500 and capital in excess of par of $340,000. The company just announced a 1-for-5 reverse stock split. What will the par value per share be after the split?

Question

Quizplus · Accepted Answer

In a 1-for-5 reverse stock split, the number of shares is reduced by a factor of 5, and the par value per share is increased by the same factor. The original par value is $1, so after the split, it will be $1 x 5 = $5 per share.

Michael's Boating Supplies Has 150,000 Shares of Stock Outstanding with a Par