Asked by Pannu Jassi on May 01, 2024
Verified
Toombs Media Corp.recently completed a 3-for-1 stock split.Prior to the split,its stock sold for $150 per share.The firm's total market value was unchanged by the split.Other things held constant,what is the best estimate of the stock's post-split price?
A) $50.00
B) $52.50
C) $55.13
D) $57.88
Stock Split
A stock split is a corporate action that increases the number of a company's shares by dividing each share, which can make the stock more affordable to investors.
Total Market Value
The combined market price or value of all of a company's outstanding shares, reflecting its overall market capitalization.
Post-Split Price
The new stock price following a stock split, adjusted to reflect the increase in the number of shares without altering the company's market capitalization.
- Ascertain the impact of stock dividends and stock splits on the share price and market valuation.
Verified Answer
MK
Mirjana KristoMay 08, 2024
Final Answer :
A
Explanation :
In a 3-for-1 stock split, each share is divided into 3 shares, so the price per share would be divided by 3. Therefore, if the pre-split price was $150, the post-split price would be $150 / 3 = $50.00.
Learning Objectives
- Ascertain the impact of stock dividends and stock splits on the share price and market valuation.