he company with the common equity accounts shown here has declared a 4-for-1 sto

Question

he company with the common equity accounts shown here has declared a 4-for-1 stock split when the market value of its stock is $40 per share. The firm’s 75 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) $ 450,000 Capital surplus 859,000 Retained earnings 3,850,800 Total owner's equity $ 5,159,800 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.) New par value $ per share 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 $

Explanation / Answer

current par value = 1

new par value = current par value/number of shares per share after stock split

= 1/4

= 0.25

dividend per share = 0.75 *4/(1+25%)

= 2.4 per share

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