4. Stock splits and stock dividends Aa Aaa Skoll Technologies is considering a 3

Question

4. Stock splits and stock dividends Aa Aaa Skoll Technologies is considering a 3-for-1 stock split on its common stock. s current stock price is $48.00 per share, and the stock split is supposed to be only an accounting change that doesn't affect a firm's value directly. If the stock split does not affect the firm's value, what is Skoll's expected stock price after the split? $15.00 O $16.00 $18.00 $22.00 O $23.00 An analyst covering Skoll's stock thinks the stock split is a positive signal that the firm expects its stock price to continue rising. He thinks a 3-for-1 stock split will result in a favorable reaction from the market and the firm's market capitalization will increase by 4%. If the market does react this way to the split, what is its expected stock price after the split? $20.80 $16.64 $23.92 $17.68 $21.84 O A stock dividend is another way of keeping the stock price from going too high. Skoll currently has 1,500,000 shares of common stock outstanding If the firm pays a 5% stock dividend, how many shares will the firm issue to its existing shareholders? O 39,000 O 75,000 O 36,000 O 65,000 48,000

Explanation / Answer

The company splits its stock 3-for-1. each shareholder holds thrice as many shares. The price of each share is adjusted to $16. (48/3) 16*104% =16.64 150000*5% = 75000 share

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