Stockton Mineral Operation, Incorporated (SMO), currently has 515,000 shares of stock outstanding that sell for $40 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. SMO has a five-for-three stock split? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. SMO has a 15 percent stock dividend? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. SMO has a 44.5 percent stock dividend? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. SMO has a 2-for-7 reverse stock split? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Stockton Mineral Operation, Incorporated (SMO), currently has 515,000 shares of stock outstanding that sell for $40 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. SMO has a five-for-three stock split? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. SMO has a 15 percent stock dividend? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. SMO has a 44.5 percent stock dividend? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. SMO has a 2-for-7 reverse stock split? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Stockton Mineral Operation, Incorporated (SMO), currently has 515,000 shares of stock
outstanding that sell for $40 per share. Assuming no market imperfections or tax effects
exist, what will the share price be after:
a. SMO has a five-for-three stock split? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
b. SMO has a 15 percent stock dividend? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
c. SMO has a 44.5 percent stock dividend? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
d. SMO has a 2-for-7 reverse stock split? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
a. New share price
b. New share price
c. New share price
d. New share price
Transcribed Image Text:e. Determine the new number of shares outstanding in parts (a) through (d). (Do not
round intermediate calculations and round your answers to the nearest whole
number, e.g., 32.)
a. New shares outstanding
b. New shares outstanding
c. New shares outstanding
d. New shares outstanding
Expert Solution
Step 1: Explain stock split and stock dividend
Stock split means when one single share of the company is split into multiple shares. It will increase the number of shares and decrease the per share price.
Reverse stock split is consolidating the existing shares of stock into fewer. It will decrease the number of shares and increase the per share price.
A stock dividend means when shares of the company are being distributed in the form of a dividend.
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