Question

On December 10, Daniel Co. split its stock 5-for-2 when the market value was 65 per share. Prior to the split, Daniel had 200,000 shares of15 par value stock. After the split, the par value of the stock was?

Answer 1

The par value of Daniel Co.'s stock after a 5-for-2 stock split is $6 per share. This is calculated by dividing the company's total par value by the new number of shares.

Step-by-step explanation:

After the stock split of Daniel Co., the par value of the stock changed. A stock split does not affect the total par value of the company's outstanding shares, so although the number of shares changes, the total par value remains the same. Given that Daniel Co. had 200,000 shares of $15 par value stock before the split, the total par value was $3,000,000 (200,000 shares × $15/share).

The 5-for-2 stock split increases the number of shares by a factor of 2.5 (5 divided by 2), meaning there would be 500,000 shares after the split (200,000 × 2.5). To find the new par value per share, we divide the total par value by the new number of shares: $3,000,000 / 500,000 shares = $6 per share. Therefore, after the 5-for-2 stock split at Daniel Co., the par value of the stock would be $6 per share.