Reference no: EM132476602

Question - Smelling Company declared a 2-for-1 stock split on its common stock in order to intentionally reduce the market value of its stock so that it would be an attractive investment for a larger set of investors. The company's common stock before the split is described as follows.

Common stock: 100,000 shares outstanding, $10 par value, originally sold at $12.50, current market price $50.

Describe the expected impact, if any, that the 2-for-1 stock split will have on

a. The number of shares outstanding.

The stock split will reduce the number of shares outstanding by half of the current number.

The stock split will double the number of shares outstanding.

The stock split will triple the number of shares outstanding.

b. The market price of the stock.

The split will reduce the market price of the stock to half of its current price.

The split will not affect the market price of the stock.

The stock split will triple the number of shares outstanding.

c. The total stockholders' equity attributable to common stock.

The split will have no impact on the total stockholders' equity attributable to common stock.

The total stockholders' equity will increase.

The total stockholders' equity will decrease.