Question: A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $5 billion with

A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $5 billion with 100 million shares outstanding. Assuming that the split conveys no new information about the company, what is the value of the company, the number of shares outstanding, and price per share after the split? If the actual market price immediately following the split is $17.00 per share, what does this tell us about market efficiency?

Step by Step Solution

★★★★★

3.48 Rating (168 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Prior to the split each share was worth 5 billion100 million or 50share If the ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

195-B-F-F-M (1318).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

A firm with 100 million shares outstanding repurchased 10 million shares at the market price of $20 per share. What is the total market value of the equity after the repurchase? What is the per-share...

A company has just received some state-of-the-art electronic equipment from an overseas supplier. The packaging has been damaged during delivery, and the company must decide whether to accept the...

A company has just announced a major repurchase of its own shares. Explain the likely effect on the companys EPS and share price.

1 . 2 . 3 . 4 . 5 . 6 . 7 . Tutorial Questions # 5 ECON 7 2 0 0 Why might the efficient market hypothesis be less likely to hold when fundamentals suggest stocks should be at a lower level? Compute...

Homework 2 (Due day is April 8th) 1. Debt issued by Southeastern Corporation currently yields 12%. A municipal bond of equal risk currently yields 8%. At what marginal tax rate would an investor be...

A.) A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $6 billion with 50 million shares outstanding. Assuming that the...

Answer all parts of each question as completely as possible. 1. How many ratios of exchange would an individual have to cope with in a barter economy with 276 different items available for exchange?...

help retired for the following questions How many ratios of exchange would an individual have to cope with in a barter economy with 276 different items available for exchange? How many absolute...

A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $5 billion with 100 million shares outstanding. Assuming that the...

A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $5 billion with 100 million shares outstanding. Assuming the split...

A cyclist traveling southeast along a road at 25.0 km/h feels a wind blowing from the southwest at 32.0 km/h. To a stationary observer, what are the speed and direction of the wind? Speed: Direction:...

A hot fluid passes through circular channels of a cast iron platen (A) of thickness LA = 30 mm which is in poor contact with the cover plates (B) of thickness L B = 7.5 mm. The channels are of...

What do higher interest rates do to huisneds investment doenfing and soending on expensive consumer items

TRIAL AND APPELLATE COURTS Trial courts determine facts and apply the law to the facts; appeals courts generally accept the facts found by the trial court and review the trial record for errors of...

What are the benefits and costs for a bank when it decides to increase the amount of its bank capital?

If a bank is falling short of meeting its capital requirements by $1 million, what three things can it do to rectify the situation?

NewBank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. How many do they purchase? What...

Two machines arc being considered for a widget fabrication project. The costs for the machines are given below, assuming that widgets will be fabricated for a 7-year period. Use an equal comparison...

One techniqueto reduce the false discovery rateis Bonferroni's method. This method involves which of the following? deciding which comparisons to conduct before you run your experiment thus limiting...

How would you journalize? Analysis of Land Account Analysis of Building Account Analysis of Leasehold Improvement Accounts Analysis of Equipment Account