Question

Wilson Pharmaceuticals’ stock has done very well in the market during the last three years. It has risen from $55 to $80 per share. The firm’s current statement of stockholders’ equity is as follows:

   

Common stock (1 million shares issued at par value of $10 per share)	$	10,000,000
Paid-in capital in excess of par		10,000,000
Retained earnings		45,000,000
Net worth	$	65,000,000

a-1. How many shares would be outstanding after a two-for-one stock split? (Do not round intermediate calculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").)
  

a-2. What would be its par value? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

b-1. How many shares would be outstanding after a three-for-one stock split? (Do not round intermediate calculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").)
  

b-2 What would be its par value? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

c. Assume that Wilson earned $16 million. What would its earnings per share be before and after the two-for-one stock split? After the three-for-one stock split? (Do not round intermediate calculations and round your answers to 2 decimal places.)
  

d. What would be the price per share after the two-for-one stock split? After the three-for-one stock split? (Assume that the price-earnings ratio of 5.00 stays the same.) (Do not round intermediate calculations and round your answers to 2 decimal places.)
  

Answer 1