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    Stock Dividend, Stock Split, Reverse Stock Split

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    Menomonie Publishing stock currently sells for $40 per share. The company has 1,200,000 shares outstanding. What would be the effect on the number of shares outstanding and on the stock price of the following:

    1. 15% Stock Dividend
    2. 4-for-3 Stock Split
    3. Reverse 3-for-1 Stock Split

    Last year both Hudson Homes and Baldwin Construction earned $1 million in net income. Both companies have assets of $10 million. Hudson generated a return on equity of 11.1%, whereas Baldwin produced a return on equity of 20.0%. What can explain the differences in return on equity between the two companies?

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    Solution Summary

    The solution calculates the effect on stock price of a stock dividend, stock split and reverse stock split and explains the difference in ROE between the two companies in an attached Excel file.