A Company Has Decided to Rationalise Its Share Structure

question 43

Multiple Choice

A company has decided to rationalise its share structure.The current pre-split price is $25,and the company declares a five-for-three split.Calculate the theoretical ex-split share price.

• A)$15
• B)$23
• C)$41.67
• D)$17
• E)$27

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Definitions:

Tax Penalty

An additional charge imposed by the tax authority on a taxpayer for not meeting tax obligations or for errors in a tax return.

Taxable Withdrawals

Withdrawals from an investment account that are subject to income tax, usually from accounts that offer tax advantages at the time of deposit or investment.

Roth Retirement Plan

A type of retirement savings account that allows for tax-free withdrawals in retirement, with contributions made with after-tax dollars.

Higher Tax Rate

A tax bracket imposing a greater percentage of taxation on individuals, corporations, or particular transactions.