A company has 1,000 shares of $10 par value common stock and $5,000 of retained earnings. Two proposals are under consideration. The first is a stock split giving each shareholder two new shares for each share formerly held. The second is to declare and distribute a 50% split-up effected in the form of a dividend.
The stock split proposal will
earnings per share by
than will the proposal for a split-up effected in the form of a dividend.