Weberg Corporation is positioned ideally in the clothing business. Located in Scranton, Pennsylvania, Weberg is the only company with a distribution network for its imported goods. The company does a brisk business with specialty stores such as Bloomingdale's, 1. Magnin, and Bonwit Teller. Weberg's recent success has made the company a prime target for a takeover. Against the wishes of Weberg's board of directors, an investment group from Boston is attempting to buy 51 percent of Weberg's outstanding stock. Board members are convinced that the Boston investors would sell off the most desirable pieces of the business and leave little of value.

At the most recent board meeting, several suggestions were advanced to fight off the hostile takeover bid. One suggestion is to increase the stock outstanding by distributing a 100 -percent stock dividend.

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As a significant stockholder of Weberg Corporation, write a short memo to explain to the board whether distributing the stock dividend would make it more difficult for the investor group to take over Weberg Corporation. Include in your memo a discussion of the effect that the stock dividend would have on assets, liabilities, and total stockholders' equity-that is, the dividend's effect on the size of the corporation.