SNT Inc. is a Public Limited Company. In the following year, one of the objectiv

Question

SNT Inc. is a Public Limited Company. In the following year, one of the objectives of Company is to make its shares more attractive for the investors by increasing the afford ability of its shares for the lower income investors. Currently Company's share is selling for Rs. 200 per share (which is considered an expensive share by the investors) and company is having 6,000 outstanding shares. Now Company has two options: 4-for-1 Stock split 1-for-2 Reverse stock split Required: Calculate the par value per share for option 1 Calculate the par value per share for option 2 Which option the company should select in order to meet its objective and why?

Explanation / Answer

A) option 1 : Par value of share after split (4 for 1) = 200/4 = 50 (Rs.) B) option 2 : Par value of share after reverse- split (1 for 2) = 200*2 = 400 (Rs.) C) Lower par value meets the objective of the company and therefore option 1 (stock split 4 for 1) should be chosen, (which will have par value of Rs. 50 as compared to Rs. 400 in option 2).

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.