Question: a. Assume United Equipment Corp. in the prior problem had total earnings of $400,000 before the stock dividend. It also had a P/E ratio of 10. What were the EPS and stock price before the stock dividend?
b. After the stock dividend, what will earnings per share and the stock price be? Assume the P/E ratio stays at 10.
c. Albert Gonzales owned 100 shares before and 110 after the stock dividend. What is the value of his portfolio (total holdings) before and after the stock dividend? Is he any better off as a result of the stock dividend?