PS Ltd has 5 000 shares outstanding with a par value of $1.00 per share. The current market value of the firm is $390,000. The company just announced a 3-for-1 share split. What will the market price per share be after the split?
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$50 will the market price per share be after the split
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The market price per share be after the split is $26
Explanation:
For determining the market price per share after the split, first, we have to calculate the per-share value which is shown below:
Per-share value = (Current market value of the firm) ÷ (Number of outstanding shares)
= ($390,000) ÷ (5,000 shares)
= $78
And, the stock split ratio is 3 for 1
So, market price per share after considering the split would be
= $78 ÷ 3
= $26
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