Question
A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $4 billion with
A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $4 billion with $100 million shares outstanding. Suppose the split conveys no new information about the company. Answer the following questions indicating how you arrived at your answer in each case.
a) What is the value of the company?
b) What is the number of shares outstanding?
c) What is the price per share after the split?
d) If the actual market price immediately following the split is $20 per share, what does this tell you about market efficiency?
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