When Walt Disney Co. declared a 4:1 split of its common stock, the announcement boosted the entertainment company’s share up by $3.50 per share.
Required
(a) What is 4:1 stock split, and how did it affect the financial statements of Walt Disney Co.?
(b) Why should the market value of Disney’s stock rise?
(c) The Wall street Journal once reported that the stock split was “a psychological 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.