(Stock Dividends and Stock Split) Oregon Inc. $10 par common stock is selling for $110 per share. Four million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Oregon common stock before a forthcoming stock issue but does not wish to distribute capital at this time. The board also believes that too manyadjustments to the stockholders’ equity section, especially retained earnings, might discourage potential investors.The board has considered three options for stimulating interest in the stock:1. A 20% stock dividend.2. A 100% stock dividend.3. A 2-for-1 stock split.InstructionsActing as financial advisor to the board, you have been asked to report briefly on each option and, considering the board’s wishes, make a recommendation. Discuss the effects of each of the foregoing options.
(Stock Dividends and Stock Split) Oregon Inc. $10 par common stock is selling for $110 per share. Four million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Oregon common stock before a forthcoming stock issue but does not wish to distribute capital at this time. The board also believes that too many
adjustments to the
The board has considered three options for stimulating interest in the stock:
1. A 20% stock dividend.
2. A 100% stock dividend.
3. A 2-for-1 stock split.
Instructions
Acting as financial advisor to the board, you have been asked to report briefly on each option and, considering the board’s wishes, make a recommendation. Discuss the effects of each of the foregoing options.
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