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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

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 as follows:

Preferred stock $0

Common Stock (100,000 shares at $1 par) 100,000

Paid-in capital in excess of par 900,000

Retained earnings 700,000

Total stockholders equity $1,700,000

Price per share $30

Earnings per share $3.60

Dividend per share $1.08

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-for4 stock split.

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

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

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