A Share Split Within the Same Class of Shares Generally

question 3

Multiple Choice

A share split within the same class of shares generally:

• A)increases the net value of the shares following the split.
• B)decreases the net value of the shares following the split.
• C)has no effect on the net value of the shares following the split.
• D)reduces the capital surplus and increases the number of shares authorized.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the outstanding loan.

Discounting

The procedure used to calculate the present value of future income, which is inversely related to both the interest rate and the amount of time that passes before the funds are received.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.