River Town Imports has 9,500 shares of stock outstanding. The current market value of the ﬁrm is $682,000. The balance sheet shows retained earnings of $387,000. The company just announced
A 3-for-2 stock split. What will the market price per share be after the split?

Question

Quizplus · Accepted Answer

After the stock split, the number of shares outstanding will increase by 50% (3/2), which means there will be 14,250 shares outstanding (9,500 x 1.5).

The total market value of the firm will remain the same at $682,000, as the split does not affect the underlying value of the company.

To determine the new price per share, we divide the market value by the number of shares outstanding:

$682,000 / 14,250 = $47.86

Therefore, the market price per share after the split will be $47.86.

River Town Imports Has 9,500 Shares of Stock Outstanding