Question

Shortly after Samantha sold her shares, the price per share increased by $1.60. Another

Answer 1

Answer:

Not affected

Step-by-step explanation:

Given: Shortly after Samantha sold her shares, the price per share increased by $\ 1.60$. Another  investor in the corporation, Jeffrey, owned $845$ shares of Graham Corporation. A $3-\text{for}-5$ reverse stock split was announced.

To Find: how was Jeffrey financially affected by the split.

Solution:

Number of shares Jeffrey had $=845$

Let the stock value of share after Samantha sold her share $=\text{x}$

Total value of Jeffrey's shares $=845\text{x}$

As a $3$ for $5$ stock split was announced

Each $5$ share is merged into $3$ shares and value of share is increased in respective ratio such that

$\text{total value of shares before split}=\text{Total value of share after split}$

Now,

Number of share Jeffrey had after split $=\frac{3}{5}\times845$

                                                                 $=507$

Stock value of share after split               $=\frac{5}{3}\text{x}$

Total value of Jeffrey's shares                $=507\times\frac{5}{3}\text{x}$

                                                                 $=845\text{x}$  

As the value of Jeffrey's stock before and after split is same therefore Jeffrey is not financially affected by the split.