Question

14 LTE stock sells for $27.99 per share and there are 330,000 shares outstanding. The company plans a 6-for-1 reverse stock split. Assuming no market imperfections or tax effects, what will the stock price be after the split? & οο516) Multiple Choice Ο 516794 Ο $139.95 Ο $149.28 Ο Ο 55.50 Ο Ο $4.57

Answer 1

14 LTE stock sells for $27.99 per share and there are 330,000 shares outstanding. The company plans a 6-for-1 reverse stock split. Assuming no market imperfections or tax effects, what will the stock price be after the split? & οο516) Multiple Choice Ο 516794 Ο $139.95 Ο $149.28 Ο Ο 55.50 Ο Ο $4.57

Stock will be reverse Split i.e. every 6 shares will be converted to 1 share.

Value of Shares = No of Shares * Value per Share

= 330,000 * 27.99

= $ 9,236,700

So new no of shares will be 330,000 * 1 /6  = 55000 Shares after reverse Split

Value after reverse split remians same So, Share Price will be

$ 9,236,700 = New No of shares * Share Price

$ 9,236,700 = 55,000 * Share Price

Share Price = $ 9,236,700/ 55,000 = $ 167.94

Option A is correct.

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