The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE) a. Show the effect on the equity accounts and per-share data of a 10% stock dividend. b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? d. What legal constraints might encourage the firm to choose a stock split over a stock
The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE) a. Show the effect on the equity accounts and per-share data of a 10% stock dividend. b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? d. What legal constraints might encourage the firm to choose a stock split over a stock
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE)
a. Show the effect on the equity accounts and per-share data of a 10% stock dividend.
b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock
split.
c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings?
d. What legal constraints might encourage the firm to choose a stock split over a stock
dividend?
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Transcribed Image Text:Stock dividend versus stock split-Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the
firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information
are given as follows:
a. Show the effect on the equity accounts and per-share data of a 10% stock dividend.
b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split.
c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings?
d. What legal constraints might encourage the firm to choose a stock split over a stock dividend?
a. Show the effect on the equity accounts and per-share data of a 10% stock dividend.
Transcribed Image Text:Data table
Preferred Stock
Common Stock (100,000 shares at $1 par)
Paid-in capital in excess of par
Retained Earnings
Total Stockholders' equity
Price per share
Earnings per share
Dividend per share
Print
Done
$
0
100,000
700,000
700,000
$1,500,000
$40
$3.70
$1.44
X
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