In: Finance
Problem 5-9 Price-Weighted Divisor (LO4, CFA2)
Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $55, $312, and $92, respectively. If Able undergoes a 3-for-4 reverse stock split, what is the new divisor?(Do not round intermediate calculations. Round your answer to 5 decimal places.)
Divisor=?
The new divisor is computed as shown below:
= ($ 55 x 3 / 4 + $ 312 + $ 92) / [ ($ 55 + $ 312 + $ 92) / 3 ]
= $ 445.25 / $ 153
= 2.91013 Approximately