The ordinary equity of Margot is selling for £56 a share.The par value per share is £1.Currently, the ﬁrm has a total market value of £89,600.How many shares will be outstanding if the ﬁrm does a 2-
For-1 stock split?

Question

Quizplus · Accepted Answer

If the firm does a 2-for-1 stock split, the number of outstanding shares will double, but the total market value will remain the same. Therefore, the total market value after the split will still be £89,600.

Current number of outstanding shares = Total market value / Price per share
= £89,600 / £56
= 1,600 shares

After the 2-for-1 stock split, the number of outstanding shares will double to:
= 1,600 x 2
= 3,200 shares

Therefore, the best choice is D.

The Ordinary Equity of Margot Is Selling for £56 a Share.The