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Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: Common stock (6,000,000 shares at $10 par) Capital in
Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: Common stock (6,000,000 shares at $10 par) Capital in excess of par Retained eamings S 60,000,000 35,000,000 75,000,000 Net worth S170,000,000 The increase in capital in excess of par as a result of a stock dividend is equal to the shares created times (Market price - Par value). The company's stock is selling for $28 per share. The company had total earnings of $12,000,000 with 6,000,000 shares outstanding and eamings per share were $2.00. The firm has a P/E ratio of 14 a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. (Do not round intermediate calculations. Input your answers in dollars, not millions (e.g. $1,230,000).) Capital Accounts Common stock Capital in excess of par Retained earnings Net worth b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.) (Do not round intermediate calculations and round your answers to 2 decimal places.) EPS Stock price c. How many shares would an investor have if he or she originally had 90 (Do not round intermediate calculations and round your answer to the nearest whole share.) Number of shares
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