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Suppose Walmart shares are trading at $150 per share and the company conducts a 2-for- 1 stock split. If investors are rational and unconstrained,
Suppose Walmart shares are trading at $150 per share and the company conducts a 2-for- 1 stock split. If investors are rational and unconstrained, the new share price should be per share. Suppose instead the share price changes to $80 per share. This deviation in share price from the rational share price, holding future cash flows constant, implies investors have their discount rate after the stock split leading to the company their capital investment. (a) $300; lowered; increasing (b) $300; lowered; increasing (c) $75; lowered; increasing (d) $75; raised; decreasing
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