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a)
To determine: The share price after a 5-3 stock split.
Introduction:
A company divides its share into multiple shares and issues them to the shareholders as an additional share; as per the decisions by the management, it is termed as a stock split.
a)
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Answer to Problem 6QP
The share price is $56.4.
Explanation of Solution
Given information: BT Company has 420,000 shares of stock outstanding and sells at $94 per share with a stock split of 5-3.
The formula to calculate the share price:
Compute the new share price:
Hence, the new share price is $56.4.
b)
To determine: The share price at 15% stock dividend.
Introduction:
Stock dividend: The distribution of dividends in the form of additional shares is termed as stock dividend. It is also termed as ‘Scrip dividend’.
b)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The share price after a 15% stock dividend is $81.74.
Explanation of Solution
Given information:
BT Company has 420,000 shares of stock outstanding and sells at $94 per share with stock dividend of 15%.
The formula to calculate the share price:
Compute new the share price:
Hence, the new share price is $81.74.
c)
To determine: The share price at 42.5% stock dividend.
Stock dividend: The distribution of dividends in the form of additional shares is termed as a stock dividend. It is also termed as ‘Scrip dividend’.
c)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The share price after 42.5% stock dividend is $65.96.
Explanation of Solution
The formula to calculate the share price:
Compute the new share price:
Hence, the new share price is $65.96.
d)
To determine: The share price after a 4-7 reverse stock split.
Introduction:
Reverse stock split is where the company reduces its shares, which are outstanding. It is the opposite of forward stock splits. This works normally as a regular dividend but reverse action will take place.
d)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The share price is $164.5.
Explanation of Solution
Given information: BT Company has 420,000 shares of stock outstanding and sells at $94 per share, and declared reverse stock split of 4-7.
The formula to calculate the new share price:
Compute the new share price:
Hence, the new share price is $164.5.
e).a)
To determine: The new number of shares outstanding.
e).a)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The new number of shares outstanding is 700,000.
Explanation of Solution
Given information:
BT Company has 420,000 shares of stock outstanding and sells at $94 per share.
The formula to calculate the new number of outstanding shares:
Compute the new outstanding ratio:
Hence, the new numbers of outstanding shares are 700,000.
b)
To determine: The new number of shares outstanding
b)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The new number of shares outstanding is 483,000.
Explanation of Solution
The formula to calculate the new outstanding shares:
Compute the new number of shares outstanding:
Hence, the new numbers of outstanding shares are 483,000.
c)
To determine: The new number of shares outstanding
c)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The new number of shares outstanding is 598,500.
Explanation of Solution
The formula to calculate the new number of outstanding shares:
Compute the new number of shares outstanding:
Hence, the new number of outstanding shares is 598,500.
d)
To determine: The new number of shares outstanding
d)
![Check Mark](/static/check-mark.png)
Answer to Problem 6QP
The new number of shares outstanding is 240,000.
Explanation of Solution
The formula to calculate the new number of outstanding shares:
Compute the new outstanding ratio:
Hence, the new number of outstanding shares is 240,000.
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Chapter 14 Solutions
ESSENTIAL OF CORP FINANCE W/CONNECT
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
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