Question

Amazing Growth Company shares currently trade at $108 per share. There are 24 million shares outstanding. If the shares are split 3-for-1, how many shares will be outstanding, and what value per share will they have (ignoring any other market changes)?

8 million shares; $324 per share

8 million shares; $36 per share

48 million shares; $54 per share

72 million shares; $36 per share

Isnt it the first option?

Answer 1

Answer-

Amazing Growth Company

The current price = $ 108 / share
Stock price after the split of 3 for 1 = $ 108 / 3 = $ 36 [ it means every share is divided ino 3 ]

The market capitalization remains same after stock split = Price/ share x number of shares outstanding.

Number of shares outstanding before split = 24 million

Number of shares outstanding after split = 3 x 24 million = 72 million [ As every share splits into 3, so the number of shares triple ]

Therefore the last Option  72 million shares; $ 36 per share is correct.