In a Three for Two Stock Split for a Company

question 106

Multiple Choice

In a three for two stock split for a company that previously had 1 million shares outstanding selling at $100 per share and a total market value of $100 million, which of the following is true:

• A)The number of outstanding shares will drop to 666,666, and the stock price will increase to $150
• B)The number of outstanding shares will increase to 1.5 million, and the stock price will drop to $66.67
• C)The number of outstanding shares will increase to 1.5 million, and the stock price will rise to $133.33
• D)The market value of the firm will increase 1 million shares x (.15) = 1.5 million
• Since total market value does not change:

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Definitions:

Division of Labor

A method that breaks down the production of a product into a series of specific tasks, each performed by a different worker.

Specialization

The concentration of the productive efforts of individuals or organizations on a limited number of activities, leading to increased efficiency and productivity.

Mass Production

A manufacturing technique that produces large quantities of goods efficiently by using assembly lines or automation technology.

Exchange

The act of giving one thing and receiving another, especially of the same type or value, in return.