Red Rocks Corporation (RRC) currently has 475,000 shares of stock outstanding th
ID: 2740100 • Letter: R
Question
Red Rocks Corporation (RRC) currently has 475,000 shares of stock outstanding that sell for $80 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. RRC has a four-for-three stock split? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $ b. RRC has a 20 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $ c. RRC has a 52.5 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $ d. RRC has a three-for-seven reverse stock split? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $ Determine the new number of shares outstanding in parts (a) through (d). a. New shares outstanding b. New shares outstanding c. New shares outstanding d. New shares outstanding
Explanation / Answer
Total market value of firm = 475000*80 = 38,000,000
After the stock splits and stock dividend total market value remain same.
RRC has a four-for-three stock split? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $
New No of shares = 475000*4/3 = 633,333
New Share price = 38000000/633,333 = $60
RRC has a 20 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $
New No of shares = 475000*1.20 = 570000
New Share price = 38000000/570000 = $66.67
RRC has a 52.5 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $
New No of shares = 475000*1.525 = 724375
New Share price = 38000000/724375 = $52.46
RRC has a three-for-seven reverse stock split? (Round your answer to 2 decimal places. (e.g., 32.16)) New share price $
New No of shares = 475000*3/7 = 203571
New Share price = 38000000/203571 = $186.67
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