Question

5. Zoe owns 430 shares of XYZ Company. The company just announced a 3-2 stock split (or forward split). XYZ currently sells for $70.00 per share. There are currently 10,000 shares outstanding. What is Zoe’s total investment in XYZ BEFORE the split? ____________________ How many total shares will XYZ have outstanding AFTER the split? _____________________ How many shares will Zoe have AFTER the split? _____________________ What will each share be worth AFTER the split? _____________________ What will Zoe’s total investment in XYZ be AFTER the split? _____________________

Answer 1

1) Zoe's total investment before split = No of share owned by Zoe x Market price before the spli
= 430 x 70
= 30100 $

2) Split is announces as 3-2 srock split and thus for every 2 shares 3 shares will be issued
Thus total number of shares after split = Before split shares x 3/2
= 10000 x 3/2
= 15000 shares

3) No of shares Zoe would have after split = 430 *3/2
= 645 shares

4) Price after split = Before split price x 2/3
=70 x 2/3
= 46.67$

5) Total value of investment of ZOE after split = After split holding x after split price
= 645 x 46.67
=30100 $