227k views
3 votes
Grullon Co. is considering a 7-for-3 stock split. The current stock price is $75.00 per share, and the firm believes that its total market value would increase by 5% as a result of the improved liquidity that should follow the split. What is the stock's expected price following the split?

User Hamburger
by
7.7k points

1 Answer

5 votes

Answer:

$33.75

Step-by-step explanation:

7-for-3 stock split means that shareholders will get 7 shares for every 3 shares they own e.g. the total number of shares in the market will increase, thus reducing the market price. Following is the calculation of market price post - split:

Price of 7 shares post split (75 * 3) 225

Price per share post split (225 / 7) 32.14

Increase in price by 5% (32.14*5%) 1.61

Total Increased price 34

User Chris Stryczynski
by
8.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories