Surf City Inc. has decided on a 3-for-1 stock split. If the firm currently has 900,000 shares outstanding, how many shares will be outstanding after the stock split?
A) 3,600,000 shares
B) 2,700,000 shares
C) 1,200,000 shares
D) 300,000 shares
Answer: B
Explanation: B) A 3-for-1 stock split = 3 × 900,000 shares = 2,700,000 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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