Final answer:
After Blossom Corporation's 3-for-1 stock split, the company will have 37,200 common shares issued. The initial trading price after the split would typically be a third of the pre-split value, subject to market change. The value per share of a liquidating company like Babble, Inc. is calculated using the PDV of expected profits divided by the number of shares.
Step-by-step explanation:
The student asked how many shares will be issued after Blossom Corporation announces a 3-for-1 stock split. Before the split, they have 12,400 common shares. A 3-for-1 stock split means that for each share a shareholder has, they will receive two additional shares. Therefore, after the split, the number of shares will be 12,400 multiplied by 3, which equals 37,200 shares.
Following the stock split, if a stock was trading at $105 per share before the split, the new trading price would typically be adjusted to a third of that value immediately after the stock split takes effect. However, this price can quickly change in the market due to supply and demand.
Applying this to a practical example: assuming Babble, Inc. decides to liquidate and pay out dividends from its profits, the present value (PDV) needs to be calculated for the profits that shareholders will receive. The PDV is the value today of a sum of money, in contrast to some future time. A PDV calculation takes into account the time value of money, or the preference for money now versus money later. The price per share would then be found by dividing the PDV of total profits by the number of shares outstanding.