SesameSweet Inc. has 220,000 shares outstanding with a market price of $12 per share. On the balance sheet, common stock is $760,000, and retained earnings are $275,000. There are no
Transactions costs.
Suppose SesameSweet declares a 3-for-1 stock split. What is the market price of a share of the
Company's stock after the split?

Question

Quizplus · Accepted Answer

In a 3-for-1 stock split, each share is divided into three, reducing the price per share by a third. The original price is $12, so after the split, the price is $12 / 3 = $4.00.