The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 20% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows:

Preferred Stock	$ 0
Common Stock (300,000 shares at $1 par)	300,000
Paid-in capital in excess of par	800,000
Retained Earnings	1,800,000
Total Stockholders' equity	$2,900,000
Price per share	$25
Earnings per share	$3.40
Dividend per share	$1.46

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a.Show the effect on the equity accounts and per-share data of a 20% stock dividend.

b.Show the effect on the equity accounts and per-share data of a 5-for-4 stock split.

c.Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings?

d.What legal constraints might encourage the firm to choose a stock split over a stock dividend.