Question

Whited Products recently completed a 4-for-1 stock split. Prior to the split, its stock sold for $75 per share. If the firm's total market value increased by 6% as a result of increased liquidity and favorable signaling effects, what was the stock price following the split

Answer 1

Answer:

$19.98

Explanation:

In a 4-for-1 stock split, the new share price is one fourth of the original price. When you also take into account the increase in market value of 6%, the new stock price following the split, if the original price was $75, is given by:

$P = \frac{\ 75}{4}*1.06\\P=\ 19.975$

The new stock price is $19.98

Answer 2

Answer:

$19.875

Explanation:

Pre-split = $75

After the Split 4 for 1

75/4 = 18.75

Then increase by 6%

18.75×1.06 =$19.875