West Wind, Inc. has 4,900,000 shares of common stock outstanding with a market value of $90 per share. Net income for the coming year is expected to be $7,100,000. What impact will a two-for-one stock split have on the earnings per share and on the price of the stock? Round the earnings per share to the nearest cent and the prices of the stock to the nearest dollar. EPS before the split: $ EPS after the split: $ Price of the stock before the split: $ per share Price of the stock after the split: $ per share
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Problem 10-01 West Wind, Inc. has 4,900,000 shares of common stock outstanding with a market value of $90 per share. Net income for the coming year is expected to be $7,100,000. What impact will a two-for-one stock split have on the earnings per share and on the price of the stock? Round the earnings per share to the nearest cent and the prices of the stock to the nearest dollar. EPS before the split: $ Price of the stock before the split: $ per share
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Market capitalization = Number of shares outstanding x market value per share
= 4,900,000 x 90
= 441,000,000
Number of shares after split = Number of shares outstanding before split x split ratio
= 4,900,000 x 2/1
= 9,800,000
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