20. The Wallace Corporation has done very well in the stock market during the last three yearsits...
Question:
20. The Wallace Corporation has done very well in the stock market during the last three years—its stock has risen from $ 18 per share to $44 per share.
Its current statement of net worth is:
Common stock (3 million shares issued at par value of $10 per share)............................ $30,000,000 Paid-in capital in excess of p a r.............................. 15,000,000 Retained earnings ................................................ 45,000,000 Net worth........................................................ $90,000,000
a. What changes would occur in the statement of net worth after a two-for-one stock split?
b. What would the statement of net worth look like after a three-for-one stock split?
c. Assume Wallace Corporation earned $6 million. What would its earnings per share be before and after a two-for-one stock split and after a three-for-one stock split?
d. What would the price per share be before and after the two-for-one and the three-for-one stock split? (Assume that the price-eamings ratio of 22 stays the same.)
e. Should a stock split change the price-earnings ratio for Wallace?
Step by Step Answer:
Foundations Of Financial Management
ISBN: 9780073382388
13th Edition
Authors: Stanley B. Block, Geoffrey A. Hirt, Bartley R. Danielsen