The Sweet Times Candy Company has the following equity accounts on its balance sheet:
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Common stock ($1 par, 500,000 shares)
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$ 500,000
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Contributed capital in excess of par
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2,000,000
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Retained earnings
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13,000,000
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Total common stockholders' equity
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$15,500,000
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The current market price of the firm's shares is $50.
a. If the firm declares a 10 percent stock dividend, what will be the impact on the firm's equity accounts?
b. If the firm currently pays no cash dividend, what is the impact of a 10 percent stock dividend on the wealth position of the firm's existing stockholders?
c. If the firm currently pays a cash dividend of $1 per share and this per-share dividend rate does not change after the 10 percent stock dividend, what impact would you expect the stock dividend to have on the wealth position of existing shareholders?