Cash versus stock dividend Milwaukee Tool has the following stockholders' equity account. The firm's common stock currently sells for

$3.63 per share.

Preferred stock

Common stock (100,000 shares at $1.01 par)

Paid-in capital in excess of par

Retained earnings

Total stockholders' equity

$ 94,000

101,000

187,000

400,000

$782,000

a. Show the effects on the firm of a cash dividend of $0.20 per share.

b. Show the effects on the firm of a 10% stock dividend.

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