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Demonstrate the impact of share split on outstanding shares

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Reference no: EM132545652

Honey Ltd had a total net profit of $9 million this year and 5 million common shares outstanding. Its ordinary share is currently trading at $33. Honey Ltd has recently declared an 10% share bonus.

Required

Question a. Show the impact of this share bonus on the outstanding shares and current market share prices.

Question b. If instead of a share bonus, the management announces a 7 to 5 share split. Demonstrate the impact of share split on the outstanding shares and current market share price.

Question c. From shareholders' perspective, will they prefer a share bonus or a share split? Explain your answer?

Reference no: EM132545652

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