Stock dividends and stock splits

Companies sometimes employ stock splits to bring down the price of its shares so that the stock is more attractive to potential investors.

Consider the case of Green Moose Industries:

Green Moose Industries currently has 25,000 shares of common stock outstanding. Its management believes that its current stock price of $110 per share is too high. The company is planning to conduct a 2-for-1 stock split.

If Green Moose Industries declares a 2-for-1 stock split, the price of the companys stock after the splitassuming that the total value of the firms stock remains the same before and after the splitshould be per share.

Blue Elk Manufacturing is one of Green Mooses leading competitors. Blue Elks market intelligence research team has learned of Green Mooses stock split plans, and is considering paying a stock dividend to its own shareholders. As a result, executives at Blue Elk decide to offer stock dividends to its shareholders. Blue Elk Manufacturing currently has 2,750,000 shares of common stock outstanding.

If Blue Elk pays a 5% stock dividend, how many total shares of common stock will be outstanding after the stock dividend?

2,454,375 shares

2,743,125 shares

3,465,000 shares

2,887,500 shares