Engines, Inc.declares a 4-for-10 stock split.The stock currently sells for $3 a share.A shareholder who owned 1000 shares of stock prior to the split will now own
A)400 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

A 4-for-10 stock split means that for every 10 shares of stock owned, the shareholder will receive 4 new shares. So, a shareholder who owned 1000 shares of stock prior to the split will now own 1000 x 4/10 = 400 shares. The stock price after the split will be $3 x 10/4 = $7.50 per share. So, the shareholder's 400 shares will be worth 400 x $7.50 = $3000.