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Cash versus stock dividend Milwaukee Tool has the following stockholders' equity account. The firm's common...

90.2K

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Question

Finance

Cash versus stock dividend Milwaukee Tool has the following stockholders' equity account. The firm's common stock currently sells for

$2.53 per share.

Preferred stock

 $

92,000
Common stock

(100,000

shares at

$0.95

par)

95,000

Paid-in capital in excess of par

216,000

Retained earnings

Modifying 400,000

Total stockholders' equity

Modifying $803,000

a. Show the effects on the firm of a cash dividend of

$0.01

per share.

b. Show the effects on the firm of a

11 %

stock dividend.

c. Compare the effects in parts a and

b.

What are the significant differences between the two methods of paying dividends?

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