Question

Toombs Media Corp. recently completed a 3-for-1 stock split. Prior to the split, its stock sold for $160 per share. The firm's total market value was unchanged by the split. Other things held constant, what is the best estimate of the stock's post-split price?

Answer 1

The best estimate of the stock's post-split price is $53.33

Step-by-step explanation:

Stock split implies that the number of shares is increased whereas the price of the share is also reduced.

In other words,3 stocks after the stock split now command the price of one stock prior to stock-split.

The price prior to the stock split is $160

the stock split is 3-1

price of a stock after stock split=$160*1/3=$53.33