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Pharma Duece Corporation, which manufactures biotech drugs, has been experiencing a tremendous growth in the price of its common stock. The stock price increased from
Pharma Duece Corporation, which manufactures biotech drugs, has been experiencing a tremendous growth in the price of its common stock. The stock price increased from $4.50 on January 1, 20X1 to $18.00 per share on December 31, 20X5. Its current net worth statement is as follows:
Common stock (2.0 million shares) | $37,000,000 |
Retained earnings | $33,000,000 |
| $70,000,000 |
Required:
- What changes would occur in the above statement after a 2 for 1 stock split?
- Earnings for 20X5 were $1,575,000, what would EPS be before and after the stock split?
- Does stock split change shareholder wealth? Explain.
- Why might a company split its shares? Explain.
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