Asked by Kaylea Peterson on May 31, 2024
Verified
Urguhart has just declared a 4-for-3 stock split. If the pre-split price of common stock was $54 a share, what do you expect the post-split price will be?
A) $72.00
B) $36.18
C) $42.23
D) $40.50
Stock Split
A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares.
Pre-split Price
The stock price of a company before it undergoes a stock split, which increases the number of shares while reducing the price per share.
Post-split Price
The adjusted price of a stock after a company has completed a stock split.
- Assess the outcomes of stock splits in terms of share valuation and stakeholders' equity.
Verified Answer
ZK
Zybrea KnightJun 02, 2024
Final Answer :
D
Explanation :
In a 4-for-3 stock split, for every 3 shares someone owns, they will now own 4 shares. To find the new price, divide the old price by the split ratio (4/3). So, $54 divided by (4/3) equals $40.50.
Learning Objectives
- Assess the outcomes of stock splits in terms of share valuation and stakeholders' equity.