Suppose that I paid $2,000 for 100 shares of Enlighten Software Solutions on April 4, 1999....

Suppose that I paid $2,000 for 100 shares of Enlighten Software Solutions on April 4, 1999. Today, the company is worth only 15 cents per share. Suppose that in order to be listed on a particular exchange, it must be priced at $1.50 (or above).

a. What sort of corporate reorganization can the firm conduct to achieve the minimum listing price, holding all else constant?

b. If the firm takes your advice in part (a), how many shares would I own?

Expert Solution

a. Current value per share = 15 cents = $0.15

Minimum value per share needed for listing = Desired price = $1.50

Consolidation or merging of shares by the help of reverse stock split can increase the value per share. Reverse stock split results in decrease in number of shares because shares are combined according to a fixed ratio or fixed number of shares are combined to form a single share of the company. As the number of shares decreases, price of stock also increases

No of shares that need to be combined to form one share = Desired price / Current price

= Minimum value per share needed for listing / Current Price = 1.50 / 0.15 = 10

Thus we need to combine 10 shares of the company to form a single share of the company. After reverse stock split for every old 10 shares investor will get 1 new share

Hence A reverse stock split of 1 for 10 is needed to achieve minimum listing pricing.

b. Current Number of shares owned = 100

No of shares owned after reveres split = Current No of shares owned / No of shares that need to be combined to form one share = 100 / 10 = 10 shares

After taking the advice, number of shares owned = 10

jeff jeffy answered 7 months ago

Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100...

Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100 par value and 12,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividends Declared & Paid Year 1 $ 4,000 Year 2 $ 8,000 Year 3 $ 42,000 The total amount of dividends paid to preferred and common shareholders over the three-year period is: Multiple Choice...

1.Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100...

1.Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100 par value and 11,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividend Declared Year 1 $ 3,000 Year 2 $ 7,000 Year 3 $ 37,000 The total amount of dividends paid to preferred and common shareholders over the three-year period is: Multiple Choice A.$24,000 preferred;...

There are 100 shares outstanding of a company and Net Income is $10,000 and is paid...

There are 100 shares outstanding of a company and Net Income is $10,000 and is paid out to shareholder as dividend without retaining earning so the dividend per share is $100. Assuming a 10 percent required return, the value of a share of stock today.

On April 1, 2020, Darius acquired 2,000 ordinary shares at P48 per share in Alan Enterprises...

On April 1, 2020, Darius acquired 2,000 ordinary shares at P48 per share in Alan Enterprises and classified the Equity investment FVOCI. In addition, the broker’s commissions for this transaction were P2,400. During 2020, Darius received P7,200 in cash dividends, and on July 1, 2020, a 5% stock dividend was issued. On December 1, Alan issued a 2-for-1- stock split. At December 31, 2020, the book value per ordinary share held by Darius is?

QUESTION 41 On April 10, 2016, Samuel Jackson, CFA purchased a put option for 2,000 shares...

QUESTION 41 On April 10, 2016, Samuel Jackson, CFA purchased a put option for 2,000 shares of Apple at $4.00 per share. Jackson paid $350 for the option that is exercisable until May 10, 2016. On May 10, when Apple stocks were selling at $3.60, Jackson exercised the option. Which of the following statements is false? a. The option should be exercised to earn payoff of 800. b. The option should not be exercised for there will be a loss....

Suppose that I am spending $6,000 every month, but now I suppose to save $2,000 every...

Suppose that I am spending $6,000 every month, but now I suppose to save $2,000 every month and only spend $4,000. According to the classical economists, how will this decision to save affect my country’s RGDP? RGDP will increase RGDP will decrease RGDP will not change Suppose that the current wage rate in a market is $14 per hour and the equilibrium wage rate is $12. Given this information, we can assume that… The quantity of labor supplied will exceed...

Suppose you are deciding how to invest $2,000. There are two options: shares in an airline...

Suppose you are deciding how to invest $2,000. There are two options: shares in an airline company and shares in a petroleum company. There is a 0.25 probability that oil prices will go up, a 0.25 probability that prices will go down, and a 0.50 percent probability they will remain the same. The value of each $100 invested after prices adjust is as follows: Event Probability Airline Oil Company prices fall 0.25 $120 $70 prices same 0.50 $105 $110 prices...

Suppose you are requested, as an IT project manager, to develop software applications to provide solutions...

Suppose you are requested, as an IT project manager, to develop software applications to provide solutions to certain issues at your workplace, place of study, or personal uses. In this assignment, you need to design a new software system that will solve these issues. In order to design that system, you need to identify, business requirements (functional and nonfunctional), identify an appropriate process model, and conduct a feasibility study. You also need to discuss ethical and professional issues related to...

On April 1, 2020, Pritima Ltd. paid $375 for a call to buy 800 shares of...

On April 1, 2020, Pritima Ltd. paid $375 for a call to buy 800 shares of Niamini Corporation at a strike price of $65 per share any time during the next six months. The market price of Niamini’s shares was $50 per share on April 1, 2020. On June 30, 2020, the market price for Niamini’s stock was $87 per share, and the value of the option was $16,700. a) Prepare the journal entry to record the purchase of the...

On April 1, 2020, Blossom Ltd. paid $150 for a call to buy 530 shares of...

On April 1, 2020, Blossom Ltd. paid $150 for a call to buy 530 shares of NorthernTel at a strike price of $25 per share any time during the next six months. The market price of NorthernTel’s shares was $25 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel’s stock was $35 per share, and the fair value of the option was $8,200. Prepare the journal entry to record the purchase of the call...

Question

Suppose that I paid $2,000 for 100 shares of Enlighten Software Solutions on April 4, 1999....

Solutions

Expert Solution

Related Solutions