The Sweet Times Candy Company has the following equity accounts on its balance sheet:

Common stock ($1 par, 500,000 shares) $ 500,000 Contributed capital in excess of par 2,000,000 Retained earnings 13,000,000 Total common stockholders’ equity $15,500,000 The current market price of the firm’s shares is $50.

a. If the firm declares a 10 percent stock dividend, what will be the impact on the firm’s equity accounts?

b. If the firm currently pays no cash dividend, what is the impact of a 10 percent stock dividend on the wealth position of the firm’s existing stockholders?

c. If the firm currently pays a cash dividend of $1 per share and this per-share dividend rate does not change after the 10 percent stock dividend, what impact would you expect the stock dividend to have on the wealth position of existing shareholders? P-698