Jones Company stock trades at $60 a share. The company is contemplating a 3-for-2 stock split. Currently, the company has EPS of 63.00, Dividend of $0.75, and 25 million shares of stock outstanding.
A. Calculate price after the split if the P/E increases by 1 point (for example, if P/E was 10 prior to split, it increases to 11 after the split)
B. Why might a stock split cause the P/E to increase?