MINDTAP Assignment 14-Distributions to Shareholders: Dividends and Share Repurch
ID: 2793783 • Letter: M
Question
MINDTAP Assignment 14-Distributions to Shareholders: Dividends and Share Repurchases Due Today at 11:59 PM CST Mainway Toy Company currently has 25,000 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. ertificate or 1 If Mainway Toy Company declares a 3-for-1 stock split, what will be the price of the company's stock after the split, assuming that the total value of the firm's stock remains the same after the split, will be $285.00 $31.67 $190.00 $47.50 Fuzzy Muffin Manufacturing Company is one of Mainway's leading If the firm pays a $380.00 dend, how competitors. Fuzzy Muffin Manufacturing Company's market intelligence research team shares Mainway's plans of announcing shareholders? a stock split, influencing the distribution policy makers. Consequently, executives at Fuzzy Muffin decide to offer stock dividends to its shareholders. many shares will the firm issue to its existing O 46,200 shares O 69,300 shares 59,400 shares O66,000 shares A stock dividend is another way of keeping the stock price from going too high. Fuzzy Muffin currently has 1,100,000 shares of Type here to searchExplanation / Answer
a.
Current number of share outstanding = 25,000
Current stock price = $95
Company plan to 3 for one stock split,it means for each stock shareholder will receive 3 stock and stock price of comapny become one third of current price. So after Split number of share outstanding become 75,000 and share price become $31.67.
New stock price = $95 / 3
= $31.67
New Stockprice of company after split will be $31.67.
Option (B) is correct answer.
b.
Number of share wiith FMM = 1,100,000
company plans for 6% stock dividend,so after stock dividend number of share outstanding increase by 6% and share price reduce at same rate that total market value of company remains constant.
Number of stock issue = 1,100,000 × 6%
= 66,000
Number of share issue for stock dividend is 66,000.
Option (D) is correct answer.
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