Engines, Inc.declares a 2-for-5 stock split.The stock currently sells for $3 a share.A shareholder who owned 100 shares of stock prior to the split will now own
A) 40 shares valued at about $7.50 a share.
B) 40 shares valued at about $1.20 a share.
C) 250 shares valued at about $7.50 a share.
D) 250 shares valued at about $1.20 a share.

Question

Quizplus · Accepted Answer

The stock split means that for every 5 shares owned, the shareholder will now own 10 shares. Since the shareholder owned 100 shares, they will now own 200 shares. The stock price will be adjusted to reflect the split, so the new stock price will be $3 / 2 = $1.50 per share. Therefore, the shareholder's 200 shares will be worth 200 * $1.50 = $300.