A Corporation Has 12,000 Shares of $20 Par Value Stock

question 121

True/False

A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.

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Definitions:

Firm Value

The total value of a company, determined by its ability to generate future earnings and its assets and liabilities.

Financial Engineering

The application of mathematical methods to the solution of financial problems, including the design and structuring of financial instruments and strategies.

Hedge Risk

The practice of making investments to reduce the risk of adverse price movements in an asset, typically involving derivatives.

New Securities

Financial instruments that have been recently issued, including stocks, bonds, or other financial assets available for investors to buy.