Question
( Stock dividends ) In the spring of2016, the CFO of HTPL Distributing Company decided to distribute a stock dividend to its shareholders.Specifically, the CFO
(Stock dividends) In the spring of2016, the CFO of HTPL Distributing Company decided to distribute a stock dividend to its shareholders.Specifically, the CFO proposed that the company pay 0.05 shares of stock to the holders of each share of common stock such that the holder of1,000 shares of stock would receive an additional 50 shares of common stock.
a. If the firm had total net income for the year of $10,000,000 and had 23,000,000 shares of common stock outstanding before the stockdividend, what was thefirm's earnings pershare?
b. After paying the stockdividend, what was thefirm's earnings pershare?
c. If you owned1,000 shares of stock before the stockdividend, how many dollars of earnings did the firm earn from your1,000-share investment? After the stock dividend waspaid, how many dollars of earnings did the firm earn on your larger shareholdings? What effect would you expect from the payment of the stock dividend on your total investment in thefirm?
a. Before the stockdividend, what was thefirm's earnings pershare?
$
nothing
(Round to four decimalplaces.)
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