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

Consider the following case:

Mainway Toy Company currently has 15,000 shares of common stock outstanding. Its management believes that its current stock price of $95 per share is too high. The company is planning to conduct stock splits in the ratio of 3 for 1 as described in the animation.

If Mainway Toy Company 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 .

Hackworth Hardware Company is one of Mainways leading competitors. Hackworth Hardware Companys market intelligence research team shares Mainways plans of announcing a stock split, influencing the distribution policy makers. Consequently, executives at Hackworth decide to offer stock dividends to its shareholders.

A stock dividend is another way of keeping the stock price from going too high. Hackworth currently has 2,300,000 shares of common stock outstanding.

If the firm pays a 7% stock dividend, how many shares will the firm issue to its existing shareholders?

161,000 shares

128,800 shares

144,900 shares

152,950 shares