Chapter 18, Problem 20P

a.

Summary Introduction

To calculate: The shares owned by Dean Smith after reverse stock split.

Introduction:

Reverse Stock Split:

A corporate procedure through which the management of a company consolidates its current shares to decrease the number of shares outstanding is termed as reverse stock split or stock merge.

b.

Summary Introduction

To calculate: The anticipated stock price post reverse stock split.

Introduction:

Reverse Stock Split:

A corporate procedure through which the management of a company consolidates its current shares to decrease the number of shares outstanding is termed as reverse stock split or stock merge.

c.

Summary Introduction

To calculate: The actual price of the stock on the basis of the assumption that stock would go up, but only up to 80% of the value computed in part (b).

Introduction:

Reverse Stock Split:

A corporate procedure through which the management of a company consolidates its current shares to decrease the number of shares outstanding is termed as reverse stock split or stock merge.

d.

Summary Introduction

To calculate: The change in the value of the holdings of Dean Smith from before the reverse stock split to after it.

Introduction:

Reverse Stock Split:

A corporate procedure through which the management of a company consolidates its current shares to decrease the number of shares outstanding is termed as reverse stock split or stock merge.