In 1970, Wal-Mart offered 300, 000 shares of its common stock to the public at a
ID: 2741099 • Letter: I
Question
In 1970, Wal-Mart offered 300, 000 shares of its common stock to the public at a price of $16.50 per share. Since that time, Wal-Mart has had 11 two-for-one stock splits. On a purchase of 100 shares at $ 16.50 per share on the company's first offering, the number of shares has grown to 204, 800 shares worth $10, 887, 600 in January 2010. What is the return on investment for investors who purchased the stock in 1970 (over a 40-year ownership period)? Assume that no dividends were received during that period.Explanation / Answer
Initial investment for 100 share = 1650
Initial share price = 16.5
share price after 40years = 10887600/204800 = 53.162
Split adjusted share price = 16.5/204800 = 0.008
Simple return on investment = (53.16-0.008)/0.008 = 6597.545
Annual return on investment = ((6598+1)^(1/40)-1) = 24.59