Global Financial Corporation (GFC) has 10 million shares outstanding, each currently worth $80 per share. The firm Accs mangers are considering a plan to split the company Accs stock 2-for-1, but they are concerned about the impact this split announcement will have on the firm Accs stock price.
a. If GFC Accs mangers announce a 2-for-1 stock split, what exactly will the company do, and what will GFC Accs stock price likely be after the split?
b. How many total shares of GFC stock will be outstanding after the split?
c. If GFC Accs mangers believe that the ideal stock price for the firm Accs shares is $20 per share, what should they do? How many shares would be outstanding after this action?
d. Why do you think GFC Accs managers are considering a stock split?