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Question 5 of 5 > - /6 = View Policies Current Attempt in Progress Peninsula Minerals Ltd's authorized share capital consists of an unlimited number of common shares with 9.3 million outstanding After some early successes, the company has failed to locate new mineral deposits and has also decreased its estimates of the amount of minerals in existing mines. As a result, earnings per share and the share price have been declining and are currently $0.17 and $0.68 per share, respectively. Peninsula Minerals is considering a reverse stock split (one that decreases the number of shares outstanding instead of increasing them) of one-for-three. Why would any company want to reverse split its shares? What would be the likely effect of the reverse split on the earnings per share and share price? , T I. . A company performs a reverse stock split to boost its stock price by decreasing the number of shares outstanding A reverse stock split has no inherent effect on the company's value with market capitalization remaining the same after it's executed. This path is usually pursued to prevent a stock from being delisted or to improve a company's image and visibility 60 Ward's Textboald Media A w P - /6 e Textbook and Media Would repurchasing shares achieve the same result as a reverse split? What is the likely reason that management prefers a reverse split over repurchasing shares? B T I. IEE . * 3 99 T. O Word(s) e Textbook and Media