Question

The market value of Yeates Corporation's common stock had become excessively high. The stock was currently selling for $300 per share. To reduce the market price of the common stock, Yeates declared a 3-for-1 stock split for the 250.000 outstanding shares of its $10 par value common stock.

Required: Determine the number of common shares outstanding and the par value after the split. (Round par value answer to 2 decimal places.)

Answer 1

After the 3-for-1 stock split, Yeates Corporation will have 750,000 common shares outstanding with a par value of approximately $3.33 per share.

Step-by-step explanation:

To determine the number of common shares outstanding and the par value after the stock split for Yeates Corporation, we perform the following calculations:

• 
  
• Initially, there are 250,000 shares outstanding.
• 
  
• A 3-for-1 stock split means that for each share owned, a shareholder now holds 3 shares.
• 
  
• So, the new number of shares outstanding is 250,000 shares × 3 = 750,000 shares.
• 
  
• The par value of each new share is the original par value divided by the split ratio, so $10 / 3 = approximately $3.33 per share (rounded to two decimal places).

Therefore, after the 3-for-1 stock split, Yeates Corporation will have 750,000 common shares outstanding with a par value of $3.33 per share.