The Retail Outlet has 6,000 shares outstanding with a par value of £1.00 per share.The current market value of the firm is £420,000.The statement of financial position shows the additional paid in capital account value of £136,000 and retained earnings of £234,000.The company just announced a 2-for-1 stock split.What will the market price per share be after the split?

Question

Quizplus · Accepted Answer

After a 2-for-1 stock split, the number of shares doubles to 12,000. The market value remains £420,000, so the new price per share is £420,000 / 12,000 = £35.

The Retail Outlet Has 6,000 Shares Outstanding with a Par