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Does a stock become cheaper when it splits?-- Toshi from Colorado
: When a stock splits, it ends up with a lower price, but it is not cheaper. For example, a $40 stock with earnings of $2 a share that splits 2-for-1 becomes a $20 stock with earnings of $1 share. The price-to-earnings ratio of 20 stays the same, so the stock is equally valued in each case.
: I am not recommending Sony at this time. Sony's video-game business is its crown jewel, and we don't know when the Sony PlayStation 3 will hit the market, and at what price.
In addition, even though Sony has done a great job with its big-screen televisions, there is enormous competition in the core consumer electronics business, where it needs to produce more must-have products to complement its superior video-game offerings.
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