Tangshan Mining has 100,000 shares outstanding and just declared a 3-for-2 stock split. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock dividend, the firm's shares should trade at ________ per share.
A) $33.33
B) $50.00
C) $75.00
D) none of the above

Question

Quizplus · Accepted Answer

A 3-for-2 stock split means that for every two shares an investor owns, they will receive three shares. In other words, the investor will own 1.5 times their original number of shares. 
Since Tangshan Mining had 100,000 shares outstanding, the number of shares outstanding after the split will be 1.5 times that amount, or 150,000 shares. 
The total value of the shares will remain the same, so we can divide the pre-split share price of $50 by the new number of shares to find the post-split share price: 
$50 / 1.5 = $33.33 per share.

Tangshan Mining Has 100,000 Shares Outstanding and Just Declared a 3-For-2