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

a. Show the effects on the firm of a cash dividend of $0.01, $0.05, $0.10, and $0.20 per share.

b. Show the effects on the firm of a 1%, 5%, 10%, and 20% stock dividend.

c. Compare the effects in parts a and b. What are the significant differences between the two methods of paying dividends?