Zimmer Corp. has just declared a 5 for 4 stock split. If the pre-split price of common stock was $36 a share, what will be the post-split price per share (assuming no other changes occur)?
A) $30.00
B) $27,00
C) $28.80
D) $32.00

Question

Quizplus · Accepted Answer

A 5 for 4 stock split means that for every 4 shares of stock you own, you will receive an additional 1 share. This means that the total number of shares in the market will increase by 25%. Therefore, the post-split price per share will decrease by 20% (1/5). The new price per share will be $28.80 ($36/1.25).