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?

Question

Tomas Diaz

Business

2 July, 13:57

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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Answers (1)

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Jair · Answer 1

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