The Winston Co. has 120,000 shares of stock outstanding. The current market value of the ﬁrm is $4.5 million. The company has retained earnings of $2.1 million. The company is planning a 3-for-1
Stock split. What will the market price per share be after the split?

Question

Quizplus · Accepted Answer

After a 3-for-1 stock split, the number of shares will triple to 360,000 shares. The market value of the firm remains $4.5 million. Therefore, the new market price per share will be $4,500,000 / 360,000 = $12.50.