Please help with the following questions Stock splits end stock dividends Skoll
ID: 2670448 • Letter: P
Question
Please help with the following questions
Stock splits end stock dividends Skoll Technologies is considering a 3-for-1 stock split on its common stock. Skoll's current stock price is $60.00 per share. and the stock split is supposed to be only an accounting change that doesn't affect a firm's value directly. If the stock split does not affect the firm's·value, what is Skoll's expected stock price after the split? $16.00 $22.00 $17.00 $24.00 $20.00 An analyst covering Skoll's stock thinks the stock split is a positive signal that the firm expects its stock price to continue rising. He thinks a 3-for-l stock split will result in a favorable reaction from the market and the firm's market capitalization wilt Increase by 45. If the market does react this w ay to the split, what is its expected stock price after the split? $17.68 $20.80 $21 8* $22.88 $18.72 A stock dividend is another way of keeping the stock price from going too high Skoll· currently has 1,200.000 shares of common stock outstanding. If the firm pays a 3% stock dividend, how many shares will the firm issue to its existing shareholders' 65.000 Q 36.000 42,000 60,000 70,000Explanation / Answer
1. 3:1 Split should reduce price from 60 to 60/3 = 20.00 2. 20.80.....Inc in Mkt Cap by 4%. SO new price = 20*1.04 = 20.80 3. 36000. 1200,000*3% = 36000