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3-for-1 split. After the split, the price of one share was $39.24. What was the pre-split price per share?

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Answer: $117.72

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Explanation:

Let's say that the company is valued at $300 just as a simple example.

Also, let's say there are 100 shares each worth $3, so we have 100*3 = 300 as the total value of the company.

A 3-for-1 split means that for each share, it will get turned into 3 shares. So you turn in 1 share and in return you get 3 shares back. Or put another way, each share is ripped/cut into 3 equal pieces.

After doing this split, we would have 3*100 = 300 shares and each share would be now worth (1/3)*3 = 1 dollar. Note the new number of shares multiplied with the new value per share is still the same total valuation of $300. Doing a stock split, or a reverse stock split, will not change the value of the company. This is a good thing or else companies would simply do (reverse) splits all the time to increase their value however large they wanted without actually contributing anything to society.

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So quite simply, when we do a 3-for-1 split, we multiply the old price per share by 1/3 to get the new price per share.

Let

x = old price per share

y = new price per share

So x happens before the split and y is after the split.

For a 3-to-1 split, we can form this equation

y = (1/3)x

which solves to

x = 3y

when we multiply both sides by 3

We know that y = 39.24, which means,

x = 3y

x = 3*39.24

x = 117.72

The pre-split price per share was $117.72

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So in short, all we did was multiply the given number (39.24) by 3.

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