When a firm announces a two-for-one stock split (in the absence of other new information),investors should expect that:
A) earnings per share will fall in half but stock price will remain the same.
B) stock price will fall in half but earnings per share will remain the same.
C) both earnings per share and stock price will remain the same.
D) both earnings per share and stock price will fall by half.

Question

Quizplus · Accepted Answer

In a two-for-one stock split, the number of shares doubles, so the earnings per share (EPS) will fall by half because the same earnings are now spread over twice as many shares. The stock price will also typically fall by half to reflect the increased number of shares, keeping the overall market capitalization the same.

When a Firm Announces a Two-For-One Stock Split (In the Absence