Assignment
Wilson Pharmaceuticals' stock has done very well in the market during the last three years. It has risen from $15 to $40 per share. The firm's current statement of stockholders' equity is as follows:
| Common stock (5 million shares issued at par value of $10 per share) |
$ |
50,000,000 |
| Paid-in capital in excess of par |
|
16,000,000 |
| Retained earnings |
|
44,000,000 |
|
|
|
| Net worth |
$ |
110,000,000 |
a-1. How many shares would be outstanding after a two-for-one stock split?
a-2. What would be its par value?
b-1. How many shares would be outstanding after a three-for-one stock split?
b-2 What would be its par value?
c. Assume that Wilson earned $15 million. What would its earnings per share be before and after the two-for-one stock split? After the three-for-one stock split?
d. What would be the price per share after the two-for-one stock split? After the three-for-one stock split? (Assume that the price-earnings ratio of 13.33 stays the same.)