During
a 2-for-1 split, investors usually receive an additional share for each one
he/she holds and the value of each share is halved. Before the split, the
investor held 400 shares of xyz common stock whose total value was $20,000.
This means that each stock was valued at $50 each. Therefore after the
2-for-1 split this investor now possessed 800 shares, with each share being
valued at $25 per share. If the investor sold 100 shares for $10,000 this
means that each share was valued at $100 in this transaction; a profit of $75
on each share or ($75*100) $7,500 in total. The number of shares this
investor remained with are 700 shares valued at $25 each. So even if he/she
decided to sell them at market value of $25 each, this would amount to a
total of $17,500. If you add $10,000 to this amount (for the 100 shares sold
at $100) this comes to a total of $27,500. This is still a profit considering
that the total value of the 400 shares before was $20,000
