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