The Klingon Fastener Company has the following shareholders' equity account:
|
Common stock ($8 par value)
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$ 2,000,000
|
|
Additional paid-in capital
|
1,600,000
|
|
Retained earnings
|
8,400,000
|
|
Total shareholders' equity
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$12,000,000
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The current market price of the stock is $60 per share.
a. What will happen to this account and to the number of shares outstanding with (1) a 10 percent stock dividend? (2) a 2-for-1 stock split? (3) a 1-for-2 reverse stock split?
b. In the absence of an informational or signaling effect, at what share price should the common stock sell after the 10 percent