Prezario's Has 14,500 Shares of Stock Outstanding with a Par

question 52

Multiple Choice

Prezario's has 14,500 shares of stock outstanding with a par value of $1 per share. The current market value of the firm is $287,000. Currently, the retained earnings account balance is $197,000 and the capital in excess of par value account balance is $47,900. The company just announced a stock split of three-for-one. What is the common stock account balance after the stock split?

• A) $29,000
• B) $14,500
• C) $4,833
• D) $7,250
• E) $43,500

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Definitions:

Present Value

The contemporary valuation of a future sum of money or sequence of cash inflows, considering a certain rate of return.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.

Net Investment

The total amount spent on purchasing new capital assets minus depreciation on existing assets, indicating the actual increase in a company's capital stock.

Cash Operating Costs

Expenses directly related to the daily operational activities of a business, excluding financing costs and taxes.