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Electronic Corporation stock dividends and stock splits

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An electronics corporation's common stock is selling for $44 per share, and its common stockholders' equity is shown here.
a. Show the impact of a 50% stock dividend.
b. Show the impact of a 3-for-2 stock split.
c. Describe how the stock market would react to each event. How would you explain the difference in reaction?

Paid-in capital ($4 par value; 5,000,000 shares) $ 20,000,000
Capital contributed in excess of par value 30,000,000
Retained earnings 50,000,000
Common stockholders' equity $100,000,000

Please show all equations used in detail

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Solution Summary

Describe how the stock market would react to each event. How would you explain the difference in reaction?

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I hope this explains it.

In a stock split, in this case 3 for 2, means that for every 2 shares a stockholder holds, the company exchanges 3, hence you should do this 5 million divided by 2 multiplied by 3 to get 7.5 million shares. OK?

However, the TOTAL paid in capital will NOT change in a stock split. hence, the it would still be 20 million. To get the par ...

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