Answer:
The Luther's new share price is closest to $16
Explanation:
For computing the new share in case of the stock split, first we have to find out the value of total share which is shown below:
Value of share = Outstanding number of shares × price per share
= 5,000,000 × $40
= 200,000,000
Now we find out the outstanding shares after the stock split which equal to
= Value of share × stock split ratio
=5,000,000 × 5 ÷ 2
= 12,500,000
Then, compute the new share price which is equal to
= Value of shares ÷ stock split outstanding shares
= 200,000,000 ÷ 12,500,000
= $16
Hence, Luther's new share price is closest to $16
