When a Firm Announces a Two-For-One Stock Split (In the Absence

question 104

Multiple Choice

When a firm announces a two-for-one stock split (in the absence of other new information) , investors should expect that:

• A)earnings per share will fall by half but stock price will remain the same.
• B)stock price will fall by half but earnings per share will remain the same.
• C)both earnings per share and stock price will remain the same.
• D)both earnings per share and stock price will fall by half.

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Definitions:

Depreciation Expense

The allocated portion of the cost of a fixed asset, written off each year over the asset's useful life for accounting and tax purposes.

Scarcity

Occurs when the amount people desire exceeds the amount available at a zero price.

Choice

The act of selecting between two or more possibilities, often present in decision-making processes.

Economics

The study of how people use their scarce resources to satisfy their unlimited wants