Keys 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?
A)6.98
B)7.00
C)7.35
D)7.72
E)8.10

Question

Quizplus · Accepted Answer

The new price of $25 per share is about 7 times less than the current price of $175 per share. Therefore, for the stock price to be reduced to $25 per share, a 7-for-1 stock split is required. This means that for every one share of the old stock, 7 new shares will be given, resulting in the reduction of the stock price to $25 per share. The closest option is 7.00 (B).

Keys Financial Has Done Extremely Well in Recent Years,and Its