| The company with the common equity accounts shown here has declared a 5-for-one stock split when the market value of its stock is $31 per share. The firm’s 70-cent per share cash dividend on the new (postsplit) shares represents an increase of 25 percent over last year’s dividend on the presplit stock. |
| Common stock ($1 par value) | $ | 405,000 |
| Capital surplus | 850,000 | |
| Retained earnings | 3,760,800 | |
| Total owner’s equity | $ | 5,015,800 |
| What is the new par value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) |
| New par value | $ per share |
| What was last year’s dividend per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) |
| Dividend per share |
What is the new par value per share?
=$31 / 5
= $6.2
New par value
$ 6.2 per share
What was last year’s dividend per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
($0.70 * 5) = $3.50 this is 125% of last year’s dividend
=3.50 / 1.25
= $2.8 <last year’s dividend on pre-split stock
Dividend per share
$ 2.8
