The Mining Co. has 110,000 shares of stock outstanding. The current market value of the firm is $5.5 million. The company has retained earnings of $1.8 million, paid in surplus of $2.2 million, and a common stock account value of $.11 million. The company is planning a 5-for-1 stock split. What will the market price per share be after the split?

Question

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The current market price per share is $5.5 million / 110,000 shares = $50. After a 5-for-1 stock split, the number of shares will increase to 550,000, and the market price per share will be $50 / 5 = $10.