Peterson Paper Products Inc. has 2,400,000 outstanding shares of stock selling for $52 per share. After a 2-for-1 stock split, how many shares of stock are outstanding and what is the change in the firm value (given no new information)?
A) 4,800,000 shares and a change in value of $124,800,000
B) 4,800,000 shares and a change in value of $0.00
C) 1,200,000 shares and a change in value of $124,800,000
D) 1,200,000 shares and a change in value of $0.00
Answer: B
Explanation: B) A 2-for-1 stock split = 2 × 2,400,000 shares = 4,800,000 shares. A stock split in and of itself has no value. However, the split may send a signal to the market of positive expectations for the firm.
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