Ten years ago, Vita Ltd. issued 600,000 shares, which are still outstanding, for a total value of $3.6 million. The board of directors for Vita Ltd. has become concerned with the dramatic drop in the market price of the shares to $0.30 per share. The company is at risk of being delisted if the share price drops below $0.25 per share.

Required

a. What would be the required reverse stock split to move the market price to $6.00 per share?

b. What is the average issue price per share after your recommendation in part “a”?

c. Prepare the journal entry for your recommendation.

d. Outline the advantages and disadvantages of a reverse stock split.