Effect of Stock Split
Gino's Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Midwest. Gino's Restaurant Corporation, which had 100,000 shares of common stock outstanding, declared a 5-for-1 stock split (4 additional shares for each share issued).
a. What will be the number of shares outstanding after the split?
shares
b. If the common stock had a market price of $200 per share before the stock split, what would be an approximate market price per share after the split?
$ per share
Gino's Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Midwest. Gino's Restaurant Corporation, which had 72,000 shares of common stock outstanding, declared a 3-for-1 stock split.
a. After the stock split, the number of shares outstanding will be:
100,000 shares * (5 additional shares for each share issued + 1 original share) = 100,000 shares * 6 = 600,000 shares
b. To calculate the approximate market price per share after the split, divide the original market price by the stock split ratio:
$200 per share / (5 additional shares for each share issued + 1 original share) = $200 per share / 6 = $33.33 per share (approx.)
a. To calculate the number of shares outstanding after the stock split, you need to multiply the initial number of shares by the stock split ratio. In this case, the stock split is 5-for-1, which means for every 1 existing share, an additional 4 shares will be issued.
Initial number of shares = 100,000
Stock split ratio = 5-for-1
Number of shares after the split = Initial number of shares x Stock split ratio
= 100,000 x 5
= 500,000 shares
Therefore, the number of shares outstanding after the split would be 500,000 shares.
b. To find the approximate market price per share after the stock split, you need to divide the initial market price per share by the stock split ratio.
Initial market price per share = $200
Stock split ratio = 5-for-1
Approximate market price per share after the split = Initial market price per share / Stock split ratio
= $200 / 5
= $40 per share
Therefore, the approximate market price per share after the split would be $40 per share.
A = 500000
b = 40