Brinkley Resources stock has increased significantly over the last five years, selling now for $175 per share.Management feels this price is too high for the average investor and wants to get the price down to a more typical level, which it thinks is $25 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?
A) 6.65
B) 6.98
C) 7.00
D) 7.35
E) 7.72

Question

Quizplus · Accepted Answer

To get from $175 per share to $25 per share, the stock price needs to be divided by 7. Therefore, a 7-for-1 stock split would be required, meaning that for every one old share, seven new shares would be issued. This would bring the price down to $25 per share without affecting the total market value. The closest answer choice is C) 7.00.

Brinkley Resources Stock Has Increased Significantly Over the Last Five