Question

if a company has 1,000 shares issued and outstanding, a share price of $5, and new profit of $5,000, what will the new share price be? (hint: one is best answer and two are incorrect)

Answer 1

The new share price after a company with 1,000 shares issued earns a profit of $5,000, given an initial share price of $5, is $10 per share.

Step-by-step explanation:

To calculate the new share price after a company has made a profit, you need to add the new profit to the company's market cap and then divide by the number of outstanding shares.

With 1,000 shares issued and outstanding, a share price of $5, and a new profit of $5,000, you first work out the company's market cap which is the share price multiplied by the number of shares, that gives $5 x 1000 = $5,000.

Next, add the new profit to the market cap to get $5,000 + $5,000 = $10,000.

Now, divide the new market cap by the number of shares to find the new share price, which is $10,000 / 1000 = $10 per share.