5. Stock dividends and stock splits

Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases.

Consider the following case:

Tolbotics Inc. currently has 25,000 shares of common stock outstanding. Its management believes that its current stock price of $90 per share is too high. The company is planning to conduct stock splits in the ratio of 3 for 1.

If Tolbotics Inc. declares a 3-for-1 stock split, the price of the companys stock after the split, assuming that the total value of the firms stock remains the same after the split, will be_______.

Fuzzy Muffin Manufacturing Company is one of Tolboticss leading competitors. Fuzzy Muffins market intelligence research team shares Tolboticss plans of announcing a stock split, influencing the distribution policy makers. Consequently, executives at Fuzzy Muffin decide to offer stock dividends to its shareholders.

Fuzzy Muffin currently has 3,200,000 shares of common stock outstanding.

If the firm pays a 6% stock dividend, what will be the total number of shares outstanding after the stock dividend?

A.) 3,731,200 shares

B.) 4,070,400 shares

C.) 3,392,000 shares

D.) 3,561,600 shares