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The Harley Corporation is a maker of fine cork products. Their current stock price is $90. Their most recent earnings are included in retained earnings.
The Harley Corporation is a maker of fine cork products. Their current stock price is $90. Their most recent earnings are included in retained earnings.
Preferred Stock | $1,000,000 |
Common Stock (500,000 shares at $3 par) | $1,500,000 |
Paid-in-capital in excess of par | $700,000 |
Retained earnings | $8,000,000 |
Total Stockholders equity | $11,200,000 |
The firm is considering a 3-for-2 stock split.
a. What would be the result of the stock split?
b. What change in the stock price would you expect from the stock split?
c. What is the maximum cash dividend the firm could pay on common stock before and after the stock split?
d. Contrast your answers with a 50% stock dividend.
e. Explain the difference between a stock split and a stock dividend.
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