During the current year, Acme Company uses its free cash flow to pay

quarterly dividends and to buy back its own stock. How do these

transactions impact Acme's earning per share?

Neither dividends nor stock buybacks impact earnings per share.

Dividends increase earnings per share but stock buybacks have no effect on

earnings per share.

Stock buybacks increase earnings per share but dividends have no effect on

earnings per share.

Both dividends and stock buybacks increase earnings per share.