Simmons Mineral Operations, Inc., (SMO) currently has 510,000 shares of stock ou

Question

Simmons Mineral Operations, Inc., (SMO) currently has 510,000 shares of stock outstanding that sell for $90 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. SMO has a four-for-three stock split? b. SMO has a 10 percent stock dividend? c. SMO has a 43.5 percent stock dividend? d. SMO has a four-for-seven reverse stock split? e. Determine the new number of shares outstanding in parts (a) through (d). a. New shares outstanding b. New shares outstanding c. New shares outstanding d. New shares outstanding

Explanation / Answer

a) New share price = current share price/split ratio

=90/(4/3) = 67.5

b) New share price = current share price/(1+dividend percentage)

=90/(1+0.1) = 81.82

c)

New share price = current share price/(1+dividend percentage)

=90/(1+0.435) = 62.72

d)New share price = current share price/reverse split ratio

=90/(4/7) = 157.5

e) shares outstanding

a = 510000*4/3 = 680000

b = 510000*1.1 = 561000

c = 510000*1.435 = 731850

d = 510000*4/7 =291428.57

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