Question

The Mayfair Corporation went public on January 1, 2012, with an initial public offering of 10,000,000 common shares, $6 par value, at a market price of $18 per share.

Since then, the following equity transactions had occurred:

1. In 2013, a 10% stock dividend was issued. At the time, the Mayfair common shares were trading at $36 per share.
2. In 2014, a 3-for-1 forward stock split was executed. At the time, the Mayfair common shares were trading at $72 per share.
3. In 2015, 500,000 common shares were repurchased on the open market at a price of $90 per share.
4. On December 31, 2015, the company declared and paid its first cash dividend of $0.6 per share on all outstanding common shares.

Required

1. Calculate the par value per share and the number of shares outstanding for the Mayfair Corporation on December 31, 2015.

Dec 31, 2015 shares outstanding		Answer 32,500,000
Dec 31, 2015 par value. Round to two decimal places.	$	????

Answer 1

1. Dec 31, 2015 par value: $2.00

With a 3-for-1 stock split, the number of shares outstanding will increase three times the existing number while the par value per share will decrease to one-third of the existing par value and the total common stock will remain unchanged.

Thus, par value will be $6/3 = $2.00