Question

Shortly after Samantha sold her shares, the price per share increased by $1.60. Another

investor in the corporation, Jeffrey, owned 845 shares of Graham Corporation atand

a 3-for-5 reverse stock split was announced how was Jeffrey financially affected by the split

Answer 1

Not affected

Explanation:

Given: Shortly after Samantha sold her shares, the price per share increased by
`\$1.60`. Another investor in the corporation, Jeffrey, owned
`845` shares of Graham Corporation. A
`3-\text{for}-5` reverse stock split was announced.

To Find: how was Jeffrey financially affected by the split.

Solution:

Number of shares Jeffrey had
`=845`

Let the stock value of share after Samantha sold her share
`=\text{x}`

Total value of Jeffrey's shares
`=845\text{x}`

As a
`3` for
`5` stock split was announced

Each
`5` share is merged into
`3` shares and value of share is increased in respective ratio such that

`\text{total value of shares before split}=\text{Total value of share after split}`

Now,

Number of share Jeffrey had after split
`=(3)/(5)*845`

`=507`

Stock value of share after split
`=(5)/(3)\text{x}`

Total value of Jeffrey's shares
`=507*(5)/(3)\text{x}`

`=845\text{x}`

As the value of Jeffrey's stock before and after split is same therefore Jeffrey is not financially affected by the split.