Question

A corporation has 10,000 shares of $100 par stock outstanding. If the corporation issues a 5-for-1 stock split, the number of shares outstanding after the split will be 40,000.

Answer 1

Answer:

Wrong, the total number of shares outstanding will be 50,000.

Explanation:

The corporation is issuing a 5-for-1 stock split, that means that for every 1 outstanding stock, four more will be created (= 1 + 4 = 5 total). So if the company currently has 10,000 shares outstanding, the total number of shares will increase to: 10,000 x 5 = 50,000.

The par value of the stock should decrease to $20 (= $100 par value / 5)