Split common stock 4 to 1 and reduced PAR from $80 to $20. After the split there were 600,000 shares.
To understand the impact of the stock split and the reduced par value on the number of shares, we need to break down the steps involved:
1. Stock Split: A 4 to 1 stock split means that for every 1 share an investor held before the split, they received 4 additional shares. This means that each share is divided into 4 equal parts.
2. Reduced Par Value: Par value is the nominal value assigned to each share by the company and is used to calculate the company's legal capital. In this case, the par value was reduced from $80 to $20. Par value doesn't affect the market price or the value of the shares.
Now, let's calculate the impact of the stock split and the reduced PAR on the number of shares:
If there were X shares before the split, after the split, the total number of shares is calculated as follows:
Total shares after split = X (number of shares before split) * 4 (stock split ratio)
Given that there were 600,000 shares after the split, we can set up the equation as:
600,000 = X * 4
To find the value of X (number of shares before the split), we can rearrange the equation:
X = 600,000 / 4
X = 150,000
Therefore, before the stock split, there were 150,000 shares.
It's important to note that the reduced par value does not affect the number of shares. It only affects the legal capital and does not impact the market value or the number of shares held by investors.