Edie's Health and Beauty Supply has 125,000 shares of stock outstanding with a par value of $1 per share and a market value of $3.50 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 market value per share be after the split?

Question

Quizplus · Accepted Answer

A 1-for-5 reverse stock split means that every 5 shares will be combined into 1 share. This reduces the number of shares outstanding by a factor of 5, increasing the market value per share by the same factor. The original market value per share is $3.50, so after the split, it will be $3.50 * 5 = $17.50.

Edie's Health and Beauty Supply Has 125,000 Shares of Stock