# Question About Stock Splits

Capra's stock trades at \$60 a share. Capra's stock trades at \$60 a share. The company is contemplating a 3-for-2 stock split. Currently, the company has EPS of \$3.00, DPS of \$0.50, and 10 million shares of stock outstanding. Assuming that the stock split will have no effect on the total market value of its equity, what will be the company's stock price following the stock split?
a. How many shares of stock will be outstanding after the split?
b. Calculate EPS after the split.
c. Calculate DPS after the split.
d. Calculate price per share after the split
e. Calculate price per share after the split if the price earnings multiple increases by 3
f. Why do companies split their stock? Why might a split cause the P/E to increase?

I do not understand how to set this problem up. Could you do a like problem with a step by step process. Thank you for any help you can give me.

Solution Summary

This question deals with calculations surrounding a stock split such as outstanding shares remaining, EPS, DPS, price per share and reasons for splitting stock. Attached as Excel.

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Koshali Dharamshi, MBA

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MBA, GSIMR
B.com, Devi Ahilya Vishwa Vidyalaya
Diploma in Financial Management, NMIMS

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