Posted by hong on .
Miya, a single investor owns 1000 shares of Advance C-Synergy (ACS), common stock. She originally bought the stock two years ago at initial public offering (IPO) price at RM5 per share. The stock of this fast growing technology company is currently trading for RM21 per share, so the current value of her advance ACS stock is RM21,000 (RM21 x 1000). Because the firm’s board of director believe that the stock would trade more actively in the RM 7 to RM8 price range, it just announced a 3-for-1 stock split.
a) Compare the total value of Miya’s stock holding before and after the stock split.
b) If the analyst believe that the price will fall 25% from the initial price after the split, does Miya experience any gain or loss on the stock?