A Price-Weighted Index Consists of Stocks A, B, and C

question 88

Multiple Choice

A price-weighted index consists of stocks A, B, and C which are priced at $55, $38, and $17 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split?

• A) 0.40
• B) 0.65
• C) 1.00
• D) 1.65
• E) 1.85

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Definitions:

Controllable Fixed Costs

Expenses that do not change with production level but can be altered or managed by decisions at the management level.

Average Operating Assets

The average value of the assets that are used in the day-to-day operations of a business, calculated over a specific period.

Operating Assets

Operating assets are long-term assets used in the operations of a business to generate revenue.

Contribution Margin

The amount by which the sale of products or services exceeds variable costs, contributing to the coverage of fixed costs and profit generation.