Red Rocks Corporation (RRC) currently has 520,000 shares of stock outstanding th

Question

Red Rocks Corporation (RRC) currently has 520,000 shares of stock outstanding that sell for $50 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:

RRC has a four-for-three stock split? (Round your answer to 2 decimal places. (e.g., 32.16))

RRC has a 20 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16))

RRC has a 45.5 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16))

RRC has a three-for-seven reverse stock split? (Round your answer to 2 decimal places. (e.g., 32.16))

Determine the new number of shares outstanding in parts (a) through (d).

Red Rocks Corporation (RRC) currently has 520,000 shares of stock outstanding that sell for $50 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:

Explanation / Answer

Answer:

a. Value of all shares before split =520000*50 = $26000000

Number of shares after stock split (four-for-three stock split) = 520000*4/3=693333 Shares

New share price = $26000000/ 693333 = $37.50

b. Value of all shares before stock dividend =520000*50 = $26000000

Number of shares after stock dividend = 520000*120% = 624000 Shares

New share price = $26000000/ 624000 = $41.67

c. Value of all shares before stock dividend =520000*50 = $26000000

Number of shares after stock dividend = 520000*145.5% = 756600 Shares

New share price = $26000000/ 756600 = $34.36

d. Value of all shares before split =520000*50 = $26000000

Number of shares after stock split (three-for-seven reverse stock split) = 520000*7/3=1213333

Shares

New share price = $26000000/ 1213333 = $21.43

(Number of shares in each case has been calculated already in each part)

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