Question

Nevada Corporation has 64,700 shares of $17 par stock outstanding that has a current market value of $140. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be:

Answer 1

77,640 shares

Step-by-step explanation:

Stock split occur when new shares of a company are issued to existing shareholders in proportion to their current holdings.

The share outstanding after the stock split is the addition of the existing shares and the new share issued. For this question, this can be calculated as follows:

New shares to be issued = 64,700 ÷ 5 = 12,940

Number of outstanding shares after stock split = 64,700 + 12,940 = 77,640 shares

Answer 2

$323,500 shares

Step-by-step explanation:

A stock split is a practice carried out by a company where stocks are split into multiples of its existing shares to boost liquidity.

There is no actual increase in the value of the shares, just an increase in the number. For example if a shareholder has 100 share and there is a 3-1 split, the shareholder will now have 3 shares for every one held before.

In this scenario total outstanding shares was 64,700 shares. The company offers a 5 for 1 stock split. Each share is now five, so new outstanding shares is 64,700 * 5= 323,500 shares