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Company WNE is contemplating a 30% stock dividend. The company currently has cash of $250,000, fixed assets of $5 million, and debt of $3 million. Its net income for the most recent fiscal year was $800,000. The company's shares are currently selling for $25 per share, and it has 1 million shares outstanding.
Assume that there are no costs associated with issuing a stock dividend.
a. What would be the effect of such a stock dividend on the following:
- Number of shares outstanding
- Earnings
- Market value of cash
- Market value of equity
- Share price
- Earnings per share (EPS)
- Price-earnings ratio (P/E)
- Shareholders' wealth