The company with the common equity accounts shown here has declared a 5-for-one
ID: 2798260 • Letter: T
Question
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 $30 per share. The firm's 80-cent per share cash dividend on the new (postsplit) shares represents an increase of 15 percent over last year's dividend on the presplit stock. Common stock ($1 par value) Capital surplus Retained earnings $ 460,000 861,000 3,870,800 Total owner's equity $5,191,800 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 er 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 shareExplanation / Answer
1. new par value = $0.20. per share
SInce we have a 5 for 1 stock split , the new par value should be
=>(old par value / new number of share)* old number of shares.
=>($1/5)*1
=>$0.20.
2.last year dividend per share = $3.48....(rounded to two decimals).
given 80 cent per share is the current year dividend
=>number of shares = (total value of common stock / new per share par value)
=>($460,000 / 0.20)
=>2,300,000.shares
total dividend = 2,300,000 shares * $0.80
=:>$1,840,000
this total dividend is 15% more than last years dividend
=> last year dividend = ($1,840,000 / 115%)
=>$1,600,000.
per share dividend = last year dividend / number of shares.
pre split number of shares = $460,000 / $ 1 =>$460,000 shares.
=>last year dividend per share = $1,600,000 / 460,000
=>$3.48....(rounded to two decimals).