Question
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
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
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