Ask Me Help Desk - Stock splits and stock dividends on EPS

Quote:

Originally Posted by aahuja1

Here are my questions and what I came up with. Please let me know if this is correct or point me in the right direction, thanks.

a. For the year ended December 31, 2005, Finco, Inc., reported an earnings per share of $3.12. During 2006 the company had a 3-for-1 stock split. Calculate the 2005 earnings per share that will be reported in Finco's 2006 annual report for comparitive purposes.

Here I did the following 3.12 / 3 = $1.04/share Correct?

b. During 2007 Finco had a 2-for-1 stock split. Calculate the 2005 earnings per share that will be reported in Finco's 2007 annual report for comparitive purposes.

Here I did the following 3.12 / 2 = $1.56/share Correct? however there are two years gone by here so I wasn't sure.

c. If Finco had issued a 10% stock dividend in 2006 and did not have a stock split, calculate the 2005 earnings per share that will be reported in Finco's 2006 annual report for comparitive purposes. Round your answer to 2 decimal places.

Here I did the following 3.12 * .9 = 2.808 = $2.81/share

Did I get anything right? Or am I just second guessing myself?

a. I agree
b. The split in 2007 is after the split in 2006, so I would use 3.12/3/2 = .52
c. I would use 3.12/1.1 = 2.84