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

Consider the following case:

Mainway Toy Company currently has 10,000 shares of common stock outstanding. Its management believes that its current stock price of $105 per share is too high. The company is planning to conduct stock splits in the ratio of 4 for 1.

If Mainway Toy Company declares a 4-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?

$420.00

$210.00

$26.25

$35.00

$52.50

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

A stock dividend is another way of keeping the stock price from going too high. Fuzzy Muffin currently has 1,100,000 shares of common stock outstanding.

If the firm pays a 6% stock dividend, how many shares will the firm issue to its existing shareholders?

46,200 shares

56,100 shares

66,000 shares

49,500 shares