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?

Question

Quizplus · Accepted Answer

To get the price down to $25 per share, we need to reduce the price by a factor of 175/25 = 7. This means that we would need to have 7 new shares for every old share. Therefore, the stock split required would be 7:1 or 7.00.

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