One way to lower the market price of a firms stock is via a stock split. Rock-O

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One way to lower the market price of a firm’s stock is via a stock split. Rock-O Corporation finds itself in a different situation: Its stock has been selling at relatively low prices. To increase the market price of the stock, the company chooses to use a reverse stock split of 2-for-3.

The company currently has 700,000 common shares outstanding and no preferred stock. The common stock carries a par value of $1. At this time, the paid-in capital in excess of par is $7,000,000, and the firm’s retained earnings are $3,500,000.

TO DO

Create a spreadsheet to determine the following:

  a. The stockholders’ equity section of the balance sheet before the reverse stock split.
  b. The stockholders’ equity section of the balance sheet after the reverse stock split.

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Related Book For  book-img-for-question

Principles Of Managerial Finance

ISBN: 978-0136119463

13th Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

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