R Co Has Outstanding 100 Million Shares, $1 Par Common Stock

question 118

Multiple Choice

R Co. has outstanding 100 million shares, $1 par common stock, selling for $8 per share. After a 1 for 4 reverse stock split:

• A) R would have 25 million shares, $4 par per share.
• B) The market price per share would be about $2.
• C) Fractional shares would be issued.
• D) Retained earnings would be reduced.

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Definitions:

Market Supply

The total amount of a specific good or service available for purchase at any given price level in a market, representing the combined supply of all sellers.

Price-Taker Industry

An industry in which individual firms have no control over the price of their product because the product is standardized, leading them to accept the prevailing market price.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the extent to which a firm exceeds the opportunity cost of its resources.

Market Adjustment

Market Adjustment refers to the changes in price levels and economic variables in response to supply and demand dynamics.