(Stock Dividends and Stock Split) Jenny Dill Inc. $10 par common stock is selling for $120 per share. Five million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Jenny Dill 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 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.

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.