Final answer:
The question pertains to the effects of a 4-for-one stock split and an increased post-split cash dividend on a company's common equity accounts. After the split, shareholders own more shares but the market value per share decreases proportionally. The new dividend is a 25% increase from the previous year's dividend, adjusted for the split.
Step-by-step explanation:
The question asks about the impact of a 4-for-one stock split and an increase in the cash dividend on a company's common equity accounts. When a company performs a stock split, each shareholder's number of shares increases by the split factor, but the market value per share adjusts accordingly to maintain the same total market capitalization. For instance, if a stock's market value is $34 per share before a stock split, after a 4-for-one stock split, the new market value per share would theoretically be $8.50 assuming no other market factors influence the price.
Dividends are percent of the profits distributed to shareholders, so if a shareholder holds more shares after the stock split, they receive dividends on more shares. However, the dividend rate might adjust after a split so that the total dividend payment remains proportionate. The question indicates that the new post-split dividend is 70 cents per share, which represents a 25% increase over last year's pre-split dividend. This suggests a significant increase in the dividend payment per share, as the original dividend before the 25% increase would have been 56 cents per share pre-split (accounting for the 4-for-one stock split), making the old annual dividend $2.24 per share prior to the split.