Question

Wydex stock is currently trading at $82 a share. The firm feels that its primary clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares. The firm should consider a:

Answer 1

Answer: Stock Split

Step-by-step explanation:

The company should consider a stock split which would enable it to reduce the price of its stock but without changing total shareholder value.

With a stock split, the companies stock would be divided into smaller stocks that would have a lower price but when all these are added up, the total shareholder value would not change.

Right now the stock is trading at $82 per share. If they could do a stock split such that each stock is between $20 and $25 then people would be able to spend between $2,000 and $2,500 to purchase a round lot of 100 shares.