In the spring of 2014 the CFO of Placebo Pharmaceuticals, Inc. took a proposal to the firms
Question:
a. If Placebo had total net income for the year of $ 10,000,000 and 20,000,000 shares of common stock outstanding before the stock dividend, what are firm earnings per share?
b. After paying the stock dividend, what is the firm’s earnings per share?
c. If you owned 1,000 shares of stock before the stock dividend, how many dollars of earnings did the firm earn on your 1,000 share investment? After the stock dividend is paid, how many dollars of earnings did the firm earn on your larger share holdings? What effect would you expect from the payment of the stock dividend on your total investment in the firm?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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