Question

Della's Pool Halls has 12,000 shares of stock outstanding with a par value of $1 per share and a market price of $39 a share. The firm just announced a 4-for-3 stock split. How many shares of stock will be outstanding after the split

Answer 1

Answer:

16,000 shares will be outstanding.

Explanation:

Given;

Number of outstanding stocks = 12,000

par value per share = $ 1

Market price per share = $ 39

stock split = 4 for 3 i.e  the stockholders will receive 4 shares if they are having 3 shares.

or by using the concept of unitary method

3 existing shares = 4 shares will be issued.

or

1 existing share = ( 4/3 ) shares will be issued.

thus,

for 12,000 existing shares = (4 / 3 ) × 12,000 shares will be issued.

or

12,000 existing shares = 16,000 shares will be issued.

hence,

16,000 shares will be outstanding.