Final answer:
The new share price after a 6-for-5 reverse stock split on a stock currently priced at $28.71 per share would be $34.45, making the correct answer option A.
Step-by-step explanation:
The correct answer is option A. When a company executes a reverse stock split, it consolidates the existing number of shares into fewer, proportionately more valuable shares.
In the case of the 6-for-5 reverse stock split mentioned, for every 6 existing shares, these would be merged into 5 shares. To find the new share price after the reverse split, you can use the formula:
New Share Price = Old Share Price x (Old Number of Shares / New Number of Shares)
Here, the old share price is $28.71, and because the reverse split is 6-for-5, we divide by 5/6:
New Share Price = $28.71 x (6/5) = $34.452
After the split, the price per share will round to $34.45, hence the correct answer is A, as this results in each share increasing proportionally in value to account for the reduced number of shares.
The correct answer is option B. To determine the stock price after the reverse stock split, we need to divide the number of shares outstanding by the reverse split ratio. In this case, the reverse split ratio is 6-for-5, which means that for every 6 shares owned, the investor will receive 5 new shares.
So, after the split, the new number of shares outstanding will be 5 * 450,000 = 2,250,000 shares. To find the stock price, we divide the original stock price by the new number of shares. Therefore, $28.71 / 2,250,000 = $0.01276 per share.