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8 November, 20:39

Toombs Media Corp. recently completed a 3-for-1 stock split. Prior to the split, its stock sold for $160 per share. The firm's total market value was unchanged by the split. Other things held constant, what is the best estimate of the stock's post-split price?

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  1. 8 November, 21:41
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    The best estimate of the stock's post-split price is $53.33

    Explanation:

    Stock split implies that the number of shares is increased whereas the price of the share is also reduced.

    In other words, 3 stocks after the stock split now command the price of one stock prior to stock-split.

    The price prior to the stock split is $160

    the stock split is 3-1

    price of a stock after stock split=$160*1/3=$53.33
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