Distilled Water Corporation is a company specializing in water purification and distributing bottled water to retailers. The corporation is considering a 3-for-2 stock split. The current stock price is $25 per share. The stockholders’ equity account is as follows:

a. What changes will occur in the stockholders’ equity account from the 3-for-2 stock split?
b. What change would you expect in the stock price as a result of the stock split?
c. Calculate the maximum cash dividend per share that the firm could pay on common stock before and after the stock split, assuming that legal capital includes all paid-in capital.
d. A stockholder owns 200 shares. Based on the maximum dividends payable (see part c), would the stockholder prefer the 3-for-2 stock split?
e. Differentiate between stock splits and stock dividends.

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Preferred stock Common stock (150,000 shares at $6 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $ 500,000 900,000 2,850,000 760,000 $5,010,000