Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders equity position shown. The current stock price is $120 per share. The most recent periods earnings available for common stock are included in the retained earnings.

Preferred stock $1,000,000

Common Stock (100,000 shares at $3par) 300,000

Paid-in capital in excess of par 1,700,000

Retained earnings 10,000,000

Total stockholders equity $13,000,000

• What effects on Mammoth would result from the stock split?
• What change in stock price would you expect to result from the stock split?
• What is the maximum cash dividend per share that the firm could pay on the common stock before and after the stock split? (Assume that legal capital includes all pain-in capital).
• Contrast your answer to parts a. through c. with the circumstances surrounding a 50% stock dividend

Explain the differences between stock splits and stock dividends