Question

Bermuda Triangle Corporation (BTC) currently has 520,000 shares of stock outstanding that sell for $85 per share. Assume no market imperfections or tax effects exist. Determine the share price and new number of shares outstanding if:
a. BTC has a five-for-three stock split.
b. BTC has a 12 percent stock dividend.
c. BTC has a 43.5 percent stock dividend.
d. BTC has a four-for-seven reverse stock split.

Answer 1

Answer:

a. BTC has a five-for-three stock split.

new number of shares outstanding = (520,000 / 3) x 5 = 866,666.67 ≈ 866,667

new market price per stock = ($85 / 5) x 3 = $51

b. BTC has a 12 percent stock dividend.

new number of shares outstanding = 520,000 x 1.12 = 585,400

new market price per stock = $85 / 1.12 = $75.89

c. BTC has a 43.5 percent stock dividend.

new number of shares outstanding = 520,000 x 1.435 = 746,200

new market price per stock = $85 / 1.435 = $59.23

d. BTC has a four-for-seven reverse stock split.

new number of shares outstanding = (520,000 / 7) x 4 = 297,142.86 ≈ 297,413

new market price per stock = ($85 / 4) x 7 = $148.75