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Suppose the stock of Jagdambay Exports Corporation is currently trading at $20 per share. Assume that...

Suppose the stock of Jagdambay Exports Corporation is currently trading at $20 per share. Assume that there are 6000 shares outstanding. Please explain how each step is done.

a)         If company issued a 20% stock dividend, what will its new price be?

b)        If company does a 3:2 stock split, what will its new share price be?

c)         If company does a 1:3 reverse split, what will its new share price be?

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Answer #1

a.

New price after issuing stock dividend = Previous outstanding x Price of share / (Old outstanding x (1+Stock dividend)

New price after issuing stock dividend = 6000 x 20 / (6000 x (1+20%)

New price after issuing stock dividend = 16.6666667

New price after issuing stock dividend = $16.67

b.

New stock price after stock split = Stock Price x 1 / Stock split ratio

New stock price after stock split = 20 x 1 / (3/2)

New stock price after stock split = 13.3333333

New stock price after stock split = $13.33

c.

New stock price after reverse stock split = Stock Price x 1/Stock split ratio

New stock price after stock split = 20 x 1/(1/3)

New stock price after stock split = 60

New stock price after stock split = $60.00


answered by: ANURANJAN SARSAM
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