Firm X has declared a stock dividend that pays one share of stock for every five shares owned. After the stock dividend, earnings per share will
A) remain the same.
B) decline 20%.
C) decline 5%.
D) Not enough information is given to determine an answer.

Question

Quizplus · Accepted Answer

The number of shares will increase by 20% (1 share/5 shares) and earnings per share will decline by the same amount since earnings are not affected.

Firm X Has Declared a Stock Dividend That Pays One