Question

On June 5, 2019 , ABC Inc. instituted a 4-for-1 stock split. Before the split, ABC Inc. had 200,000 shares outstanding with a price of $168 per share. Show that the stock split for ABC Inc. was a monetary non-event.

Answer 1

Answer:

Post split Shares: 800,000

Post split par value: $42

Explanation:

Given:

• Number of out standing shares:  200,000
• Price per share:  $168

ABC Inc. instituted a 4-for-1 stock split, it means that every holder of 1 share will receive 4 shares. So the total of outs standing stock will be increased 4 time, which is:

200,000*4 = 800,000 shares

The price of a split stock is calculated by dividing the face value of the proposed share:

$168 /4 = $42 per share

So:

• Post split Shares: 800,000
• Post split par value: $42