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a)
To determine: The share price after 5-3 stock split.
Introduction:
Stock split: RR Corporation divides its share into multiple shares and issues them to the shareholders as an additional share, as per the decisions of the management is termed as stock split.
a)
Answer to Problem 4QP
The share price is $48.
Explanation of Solution
Given information:
RR Corporation has 425,000 shares of stock outstanding, and sells at $80 per share with stock split of 5-3.
The formula to calculate the share price:
Compute the new share price:
Hence, the new share price is $48.
b)
To determine: The share price at 15% stock dividend.
Introduction:
Stock dividend: Distribution of dividend in the form of additional shares is termed as stock dividend. It is also termed as ‘Scrip dividend’.
b)
Answer to Problem 4QP
The share price after 15% stock dividend is $69.56.
Explanation of Solution
Given information:
RR Corporation has 425,000 shares of stock outstanding, and sells at $80 per share with stock dividend of 15%.
The formula to calculate the share price:
Compute the new share price:
Hence, the new share price is $69.56.
c)
To determine: The share price at 42.5% stock dividend.
Introduction:
Stock dividend: Distribution of dividend in the form of additional shares is termed as stock dividend. It is also termed as ‘Scrip dividend’.
c)
Answer to Problem 4QP
The share price after 42.5% stock dividend is $.56.140.
Explanation of Solution
The formula to calculate the share price:
Compute the new share price:
Hence, the new share price is $56.140.
d)
To determine: The share price after 4-7 reverse stock split.
Introduction:
Reverse stock split: The Company reduces its share, 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)
Answer to Problem 4QP
The share price is $140.
Explanation of Solution
Given information:
RR Corporation has 425,000 shares of stock outstanding, sells at $80 per share and declared reverse stock split of 4-7.
The formula to calculate the new share price:
Compute new share price:
Hence, the new share price is $140.
a)
To determine: The new number of shares outstanding in parts (a) through (b).
a)
Answer to Problem 4QP
The new number of outstanding shares is 708,333.33.
Explanation of Solution
The formula to calculate the new number of outstanding share:
Compute the new outstanding ratio:
Hence, the new number of outstanding shares is 708,333.33.
b)
To determine: New number of outstanding shares.
b)
Answer to Problem 4QP
The new number of outstanding shares is 488,750.
Explanation of Solution
The formula to calculate the new outstanding share:
Compute the new number of outstanding shares:
Hence, the new number of outstanding shares is 488,750.
c)
To determine: New number of outstanding shares.
c)
Answer to Problem 4QP
The new number of outstanding shares is 605,625.
Explanation of Solution
The formula to calculate the new number of outstanding share:
Compute the new number of outstanding share:
Hence, the new number of outstanding shares is 605,625.
d)
To determine: New number of outstanding shares.
d)
Answer to Problem 4QP
The new numbers of shares outstanding are 242,857.14.
Explanation of Solution
The formula to calculate the new number of outstanding share:
Compute the new outstanding ratio:
Hence, the new numbers of outstanding shares are 242,857.14.
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Chapter 17 Solutions
Fundamentals of Corporate Finance Standard Edition
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