Holden Corporation has declared a stock dividend that pays 5 shares of stock for every 10 0 shares owned. What will happen to EPS immediately upon the distribution of the stock dividend?
A) EPS will increase by 5%.
B) EPS will decrease by 5%.
C) EPS will not be affected by the stock dividend.
D) EPS will decrease by 4.76%.

Question

Quizplus · Accepted Answer

EPS will decrease by 4.76% because the number of shares outstanding increases by 5% (5/100), diluting the earnings per share.

Holden Corporation Has Declared a Stock Dividend That Pays 5