Big Corp.Canada has done extremely well in recent years,and its stock now sells for $140 per share.Management wants to get the price down to a more typical level,which it thinks is $15 per share.What stock split would be required to get to this price,assuming the transaction has no effect on the total market value? Put another way,how many new shares should be given per one old share?

Question

Quizplus · Accepted Answer

To get the price down to $15 per share, the stock would need to be split in a ratio that results in the new price of $15.

$140 ÷ $15 = 9.33

So, for every 1 old share there needs to be 9.33 new shares to get to $15.

And to get 9.33, we can round it up to the nearest whole number which is 10, and then divide the two numbers:

10 ÷ 4.1667 = 2.40

Therefore, a 2.40-for-1 stock split would be required to get to the target price of $15 per share.

Big CorpCanada Has Done Extremely Well in Recent Years,and Its Stock