A corporation has 10,000 shares outstanding of $25 par value and a current market value of $100 per share.If the corporation issues a 5-for-1 stock split, the market value of the stock will fall to approximately $20.

Question

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After the 5-for-1 stock split, there will be a total of 50,000 shares outstanding (5 times the current amount). The par value of each share will be reduced to $5 (1/5th of the original value). The market value of the stock will adjust accordingly to reflect the increased number of shares, and is likely to fall to approximately $20 per share.

A Corporation Has 10,000 Shares Outstanding of $25 Par Value