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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

STOCK SPLIT Gamma Medical’s stock trades at $90 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 stock price following the stock split?

Summary Introduction

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

Stock split: When a company has large number of outstanding shares, then the board of directors decided to issue more shares to current shareholders, which resulted in decreasing the number of outstanding shares and increasing the shares prices.

Explanation

Calculation of stock price after split

Given,

Current price of stock $90

Splitting in 3 for 2 stocks

Formula to calculate stock price after split is

Priceofstock=Stockpricebeforesplit×Splitratio

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