Question

On June 30, the board of directors of Sandals, Inc., declares a 2-for-1 stock split on its 24,000, $1 par, common shares. The market price of Sandals common stock is $29 on June 30. What are the number of shares, par value per share, and market price per share immediately after the 2-for-1 stock split

Answer 1

Answer:

a) Number of shares after stock split = Total outstanding shares before split × 2

=24, 000 shares × 2

=48,000 shares

Number of shares immediately after stock split is 48,000.

b)Under a stock split, the outstanding number of shares are increased as per the split. As per the given information, the split is stock is 2-for-1, therefore, after the stock split the number of outstanding shares will be twice of shares outstanding before the stock split.

Par value of each stock after split=  2

Par value per common stock before stock split = Par common shares / 2

Par value per common stock before stock split

= $1.00 /2

=$0.50

c) Market price per stock after split= 2

Market value per stock after the split= Market price of Sandals common stock / 2

= $29/2

= $14.5