If instead of a stock dividend, your firm decided to split the stock 2-1, then the number of shares outstanding and their par value per share would be
A) 1 million; $4.
B) 1 million; $8.
C) 2 million; $2.
D) 2 million; $4.

Question

Quizplus · Accepted Answer

If the stock is split 2-1, then each shareholder would receive two shares for every one share they currently own. This means that the number of shares outstanding would double (i.e. 1 million x 2 = 2 million). However, the par value per share would be reduced by half (i.e. $4 / 2 = $2). Therefore, the correct answer is C) 2 million; $2.

If Instead of a Stock Dividend, Your Firm Decided to Split