The company with the common equity accounts shown here has declared a 5-for-1 st

ID: 2786418 • Letter: T

Question

The company with the common equity accounts shown here has declared a 5-for-1 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) Capital surplus Retained earnings 405,000 850,000 3,760,800 Total owner's equity 5,015,800 What is the new par value per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) S per share New par value What was last year's dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Dividend per share References eBook & Resources

Explanation / Answer

Stock split ratio

5 for 1

total no of share before stock split

405000

total no of share after stock split

405000*5

2025000

Par value per share

total par value of stock/no of stock after stock split

405000/2015000

0.200993=.20

total dividend paid this year

.70*2025000

1417500

Dividend paid last year

1417500/1.25

1134000

Dividend per share last Year

1134000/405000

2.8