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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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STOCK SPLIT Emergency Medical’s stock trades at $145 a share. The company is contemplating a 3-for-2 stock split Assuming that the stock split will have no effect on the market value of its equity, what will be the company’s slack price following the stock split?

Summary Introduction

To calculate: Stock price after the splitting 3 for 2 stocks.

Introduction:

Stock Split:

When a company has large number of outstanding shares then the board of directors decide to issue more shares to the current shareholders thus, it results in decreasing the number of outstanding shares and increasing the shares prices.

Explanation

Given information:

Current price of stock is $145.

Splitting in 3 for 2 stocks

Stock price after split

Formula to calculate stock price after split is

Priceofstock=Stockpricebeforesplit×Splitratio

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