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Stock split

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I'm at work attempting find the answer to my work budget problem. Can you please help me?

Dan 4'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.

Can you please show step-by-step (Equation) process for each problem for each question please?

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?

How many shares of stock will be outstanding after the split?

Calculate EPS after the split?

Calculate price per share after the split?

Calculate price per share after the split if the price earnings multiple increases by 3?

Why do companies split their stock? Why might a split cause the P/E to increase?

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Solution Summary

The solution explains how to calculate the stock price and the number of shares outstanding after a stock split

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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?

Since the market value will not change, the price after the split should be such that the market value before the split is the same as the market value after the split. After the split 2 old shares are converted into 3 new shares. Currently there are 10 million shares and so after the split there will be 10/2X3 = 15 million shares
Current market value = Number of shares X Price per share = 10X60=$600 million
New market value would remain at 600 million but with 15 million shares
Stock price after the split = 600/15 = ...

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