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) EPS before would be $0.50; after the dividend, EPS would be $0.46.
C) Since they made $100 million in net income, the EPS cannot change.
D) There is not enough information to make this calculation.

Question

Quizplus · Accepted Answer

Before the stock dividend, EPS = Net Income / Shares Outstanding = $100 million / 50 million = $2. After the 8% stock dividend, the number of shares increases by 8%, so the new share count is 50 million * 1.08 = 54 million. The new EPS = $100 million / 54 million = approximately $1.85.

ZZZ Corporation Had Net Income of $100 Million Last Year