Red Rocks Corporation (RRC) currently has 475,000 shares of stock outstanding th
ID: 2612624 • Letter: R
Question
Red Rocks Corporation (RRC) currently has 475,000 shares of stock outstanding that sell for $80 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:
Red Rocks Corporation (RRC) currently has 475,000 shares of stock outstanding that sell for $80 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. RRC has a four-for-three stock split? (Round your answer to 2 decimal places. (e.g., 32.16) New share price b. RRC has a 20 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16) New share price c. RRC has a 52.5 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price d. RRC has a three-for-seven reverse stock split? (Round your answer to 2 decimal places. (e.g. 32.16)) New share price Determine the new number of shares outstanding in parts (a) through (d). a. New shares outstanding b. New shares outstanding c. New shares outstanding d. New shares outstandingExplanation / Answer
solution.
Situation A.
Outstanding stock = 475,000
Nominal value per share = $80
= 475,000 x $80 = 38,000,000
Stock split 4 for 3 mens 475,000 x 4 / 3 = 633,333.33
New no of share = 633,333.33
Nominal value per share after spilt = 38,000,000 / 633.333.33
Nominal value per share after spil = $60.00
Situation B :-
Calculetion on the basis of dividend yield aproch. = D/P
New Share price = 20 / 80 = $25
Situation C :-
Calculetion on the basis of dividend yield aproch. = D/P
New Share price = 52.5 / 80 = $65.62
Situation D :-
Outstanding stock = 475,000
Nominal value per share = $80
= 475,000 x $80 = 38,000,000
Stock split 4 for 3 mens 475,000 x 3 / 7 =203,571.42
New no of share = 203,571.42
Nominal value per share after spilt = 38,000,000 /203,571.42
Nominal value per share after spilt = $186.67
Detail of new share outstanding =
Situation A = 633,333.33
Situation B = 38,000,000 /$25 = 15,20,000
Situation C = 38,000,000 / $65.62 = 579,091.74
Situation D = 203,571.42
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