Problem =4

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 100000

common stock 400000 shares at $1 par 400000

paid in capital in excess of par 200000

retained earning 320000

total stock holders equity $ 1020000

a) show the effect 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?

d) no need for any graph

Problem # 6

stock dividend- investor security data company has outstanding 50000 shares of common stock currently selling at $40 per share the firm most recently had earning available for common stock holders of $ 120000 but it has decided to retain these funds and is considering either a 5% or a 10% stock dividend in lieu of a cash dividend

A) determine the firms current earnings per share

b) if sam waller currently owns 500 shares of the firm"s stock determine his proportion

of ownership currently and under each of the proposed stock dividend plans.

C) calculate and explain the market price per share under each of the stock dividend plans.

d) for each of the proposed stock dividends calculate the earnings per share after payments of the stock dividend.

e) what is the value of waller"s holdings under each of the plans? explain

f) should waller have any preference with respect to the proposed stock dividends?

why or why not?