A firm wants to maintain a minimum stock price of $15 a share.Due to a recent market downturn,the stock is currently selling for $6 a share.The firm should consider a:
A)3-for-1 stock split.
B)4-for-1 stock split.
C)1-for-3 reverse stock split.
D)1-for-4 reverse stock split.
E)1-for-5 reverse stock split.

Question

Quizplus · Accepted Answer

A 1-for-3 reverse stock split would reduce the number of shares outstanding by a factor of three, effectively tripling the price of each share if the market capitalization remains constant. This would increase the stock price from $6 to $18 a share, achieving the firm's goal of maintaining a minimum stock price of $15 a share.

A Firm Wants to Maintain a Minimum Stock Price of $15