Edie's Health and Beauty Supply has 125,000 shares outstanding with a par value of £1 per share and a market value of £5 a share.The company has retained earnings of £76,500 and additional paid in capital 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, every 5 shares are combined into 1 share. The par value per share will increase by a factor of 5, so the new par value will be £1 * 5 = £5.00.

Edie's Health and Beauty Supply Has 125,000 Shares Outstanding with a Par