Fundamentals of Financial Manageme...
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Fundamentals of Financial Manageme...
STOCK SPLIT After a 5-for-l stock split, Strasburg Company paid a dividend of $0 75 per new share, which represents a 9% increase over last year’s pre-split dividend. What was last year’s dividend per share?
To calculate: Last year’s dividend per share.
Stock Split:
Stock split implies an increase in the number of shares that are outstanding and decrease in the face value of share. Share capital remains the same throughout the number of shares increased after stock split.
Calculate equivalent pre-split dividend.
Given,
Dividend per share is $0.75.
Split ratio is 5 for 1.
Formula to calculate equivalent pre-split dividend,
Substitute $0.75 for dividend per share and
So, equivalent pre-split dividend is $3.75.
Calculate last year’s dividend.
Given,
New equivalent dividend is $3.75.
Growth rate of dividend is 9%
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