ZZZ Corporation had net income of $100 million last year and 50 million ordinary shares outstanding.They declared an 8% share dividend.Calculate EPS before and after the share dividend.

Question

Quizplus · Accepted Answer

To calculate EPS before the share dividend, we divide the net income of $100 million by the number of ordinary shares outstanding, which is 50 million. This gives us an EPS of $2. After the 8% share dividend, the number of ordinary shares outstanding increases to 54 million (50 million + 4 million shares as 8% of 50 million), so we divide the net income of $100 million by the new number of ordinary shares outstanding, which is 54 million. This gives us an EPS of $1.85.

ZZZ Corporation Had Net Income of $100 Million Last Year