Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
15th Edition
ISBN: 9780134478166
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 14, Problem 14.10P

Cash versus stock dividend Milwaukee Tool has the following stockholders’ equity account. The firm’s common stock currently sells for $4 per share.

Preferred stock $100,000
Common stock (400,000 shares at $1 par) $400,000
Paid-in capital in excess of par $200,000
Retained earnings $320,000
Total stockholders’ equity $1,020,000
  1. a. Show the effects on the firm of a cash dividend of $0 01, $0.05, $0.10, and $0.20 per share.
  2. b. Show the effects on the firm of a 1%, 5%, 10%, and 20% stock dividend.
  3. 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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Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)

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