The Peanut Shop has 5,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the ﬁrm is $390,000. The company just announced a 3-for-1 stock split.
What will the market price per share be after the split?

Question

Quizplus · Accepted Answer

After the stock split, the total number of shares will be 15,000 (5,000 x 3). The market value of the firm will still be $390,000. Therefore, the market price per share will be $26 ($390,000/15,000).

The Peanut Shop Has 5,000 Shares of Stock Outstanding with a Par