Financial has done extremely well in recent years, and its stock now sells for $175 per share.Management wants to get the price down to a more typical level, which it thinks is $25 per share.What stock split would be required to get to this price, assuming the transaction has no effect on the total market value? Put another way, how many new shares should be given per one old share?

Question

Quizplus · Accepted Answer

To decrease the stock price from $175 to $25, we need to reduce the price by a factor of 7. To achieve this, we need a 7-for-1 stock split, which means that for every old share, investors receive 7 new shares. Therefore, the correct answer is 7.00.

Financial Has Done Extremely Well in Recent Years, and Its