On February 19, 1992, Walt Disney Co. declared a 4:1 split of its common stock, an announce¬ ment that boosted the entertainment company’s shares up $3.50 to close at a record price of $146.50. REQUIRED:

a. What is a 4:1 stock split, and how did it affect the financial statements ofWalt Disney Co.?

b. Why should the market value of Disney’s stock rise?

c. The Wall Street Journal (February 19, 1992) reported that the stock split was “a psycho¬ logical boost and an indication that management has confidence in their performance and that the stock price can be sustained.” Explain how this explanation could account for the stock price increase.