The Retail Outlet has 6,000 shares of stock outstanding with a book value of $1.00 per share. The current market value of the firm is $420,000. The balance sheet shows retained earnings of $234,000. The company just announced a 2-for-1 stock split. What will the market price per share be after the split?

Question

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After a 2-for-1 stock split, the number of shares will double to 12,000, and the market value per share will be halved. The current market value of the firm is $420,000, so the new market price per share after the split is $420,000 / 12,000 = $35.

The Retail Outlet Has 6,000 Shares of Stock Outstanding with a Book