Rocky Ground Camping Supply Inc. has 200,000 shares of stock outstanding, each with a market value of $15. In addition, on the balance sheet the common stock account has a balance of
$1,950,000 and retained earnings of $1,450,000. If the ﬁrm declares a 4-for-1 stock split, what is the
Stock's market value after the split? Assume there are no taxes or transaction costs.

Question

Quizplus · Accepted Answer

A 4-for-1 stock split means each share is divided into 4 shares, increasing the number of shares to 800,000. The total market value remains the same, so the new market value per share is $15 / 4 = $3.75.