ZZZ Corporation had net income of $100 million last year and 50 million common shares outstanding.They declared an 8% stock dividend.Calculate EPS before and after the stock dividend.
A)EPS before would be $2;after the dividend,EPS would be $1.85.
B)There is not enough information to make this calculation.
C)EPS before would be $0.50;after the dividend,EPS would be $0.46.
D)Since they made $100 million in net income,the EPS cannot change.

Question

Quizplus · Accepted Answer

To calculate EPS before the stock dividend, divide net income by the number of common shares outstanding: 
EPS before = $100 million / 50 million shares = $2 per share

After the 8% stock dividend, there will be 4 million additional shares issued (8% x 50 million shares). The new total number of common shares outstanding will be 54 million shares. To calculate EPS after the stock dividend, divide net income by the new number of common shares outstanding: 
EPS after = $100 million / 54 million shares = $1.85 per share

ZZZ Corporation Had Net Income of $100 Million Last Year