Vegas Products sells marked playing cards to blackjack dealers. It has not paid a dividend in many years but is currently contemplating some kind of dividend. The capital accounts for the firm are

Common stock (200,000 shares) .......... . .. . .$ 5,000,000
Retained earnings ...................... .. . . . .............5,000,000
Net worth .......................................................$10,000,000
The company's stock is selling for $40 per share, and it earned $400,000 during the year with 200,000 shares outstanding, indicating a P/E ratio of 20.
a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend?
b. What adjustments would be made to EPS and the share price? (Assume the P/E ratio remains constant.)
c. How many shares would an investor end up with if he or she originally had 100 shares?
d. What is the investor's total investment worth before and after the stock dividend if the P/E ratio remains constant? (There may be a small difference due to rounding.)
e. Has Vegas Products pulled a magic trick, or has it given the investor something of value? Explain.