Firm value and stock price be after the stock split

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Reference no: EM131874242

A firm has 10M shares outstanding, each worth $80. Managers are thinking about splitting the company’s stock 2-for-1.

(A) Absent of externalities, what would the number of shares outstanding, firm value and stock price be after the stock split?

(B) Suppose managers believe that the “ideal” price for the firm’s shares is $20 per share. Absent of externalities, what exact stock split would managers need to execute to achieve this price?

Reference no: EM131874242

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