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In June 2014, Apple went through a 7-for-1 stock split. Immediately after the stock split, Apple’s...

In June 2014, Apple went through a 7-for-1 stock split. Immediately after the stock split, Apple’s stock price fell from $645 per share to $94 per share. Did Apple directly pay its shareholders any cash in that event? By what percentage does the market value of Apple’s common stock increase? Why is stock split an effective way for Apple to reward common stock shareholders?

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ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

7 for 1 stock split means giving 7 shares for every 1 share held.

Old price = 645

New price = 645/7 = 92.14

Trading price = 94

1. Apple did not pay any cash in this event.

2. % gain = (tp-np)/np = (94-92.14)/92.14 = 2.02%

3. An effective way to reward its common shareholders because it will increase the liquidity of Apple shares, hence more people can afford to buy it and buy it. Thus it will increase the price of Apple shares.

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