Whited Products Recently Completed a 4-For-1 Stock Split

question 49

Multiple Choice

Whited Products recently completed a 4-for-1 stock split.Prior to the split,its stock sold for $120 per share.If the firm's total market value increased by 5% as a result of increased liquidity and favorable signaling effects,what was the stock price following the split?

• A)$29.93
• B)$31.50
• C)$33.08
• D)$34.73
• E)$36.47

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Definitions:

Incremental Borrowing Rate

The interest rate a lessee would have to pay if borrowing over a similar term, and with similar security, the funds necessary to lease or purchase an asset.

Lessor's Implicit Rate

The interest rate used in lease agreements, assumed by the lessor, that when applied to the lease payments, equals the fair value of the leased asset.

Ordinary Annuity

A series of equal payments made at the end of consecutive periods over a fixed length of time, such as monthly rent or annual scholarship allowances.

Present Value Factors

Multipliers used to calculate the present value of a sum to be received in the future by accounting for time value of money.