Marston Mfg. recently declared a 4- for- 1 stock split for its common shares. Before the split the firm’s share price had risen to $ 600 per share and the firm’s CFO felt that this high stock price inhibited trading in the firm’s shares. Prior to the split the firm had 10 million shares of stock outstanding and had net income of $ 40 million. a. Before the stock split what is Marston’s earnings per share? b. Following the stock split, how many shares of common stock will Marston have outstanding? c. What are the firm’s earnings per share after the stock split? d. If you owned 100 shares of stock before the split, how much are the total earnings for your shares? How much are the total earnings on your post- split shares? e. Were you better off financially as the holder of 100 shares of pre- split stock after the 4- for- 1 split? Explain.
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