Brembo, an Italian automotive braking-systems supplier, announced that it was going to split the stock 5-for-1. Brambilla Fumagalli owns 100 shares of the company, which he had purchased for €40 per share years ago. Just before the stock split, Brembo’s shares were trading for €64. Answer the following questions about the impact of the stock split on Brambilla’s holdings and taxes. He is in the 23% tax bracket.

a. How many shares of Brembo will Brambilla own after the stock split?

b. Immediately after the split, what do you expect the value of Brembo to be?

c. Compare the total value of Brambilla’s stock holdings before and after the split, given that the price of Brembo stock immediately after the split was €12.8. What do you find?

d. Does Brambilla experience a gain or loss on the stock as a result of the 5-for-1 split?

e. What is Brambilla’s tax liability from the event?