P14-11 Stock dividend: Investor John McKay holds 500 common shares of Smart Life Corporation. The corporation has 50,000 shares outstanding. The current price per share is $25. Smart Life Corporation has reported earnings available to common stockholders of $220,000. The firm intends to retain its earnings and pay a 10% stock dividend.

a. Calculate the current earnings per share.

b. What is John's percentage of ownership of Smart Life Corporation before the stock dividend?

c. What is John's percentage of ownership of Smart Life Corporation after the stock dividend?

d. What do you expect the market price of the stock to be after the stock dividend?

e. Discuss the implication of a stock dividend on the earnings of Smart Life C orporation.