The Meltzer Corporation is contemplating a 7-for-3 stock split.The current stock price is $75.00 per share, and the firm believes that its total market value would increase by 5% as a result of the improved liquidity that it thinks would follow the split.What is the stock's expected price following the split?
A) $32.06
B) $33.75
C) $35.44
D) $37.21
E) $39.07

Question

Quizplus · Accepted Answer

First, calculate the new stock price immediately after the split without considering the increase in total market value: $75.00 / (7/3) = $32.14. Then, account for the 5% increase in total market value: $32.14 * 1.05 = $33.75.

The Meltzer Corporation Is Contemplating a 7-For-3 Stock Split