Question

After a 4-for-1 stock split, Perry Enterprises paid a dividend of $1.50 per new share, which represents a 4% increase over last year's pre-split dividend. What was last year's dividend per share?

Answer 1

To find last year's pre-split dividend per share, divide the current dividend of $1.50 by 1.04 to account for the 4% increase, which gives $1.4423. Then, multiply by 4 due to the 4-for-1 stock split to get approximately $5.7692.

Step-by-step explanation:

The student asked to determine the last year's dividend per share after knowing the current dividend per share post a 4-for-1 stock split which also included a 4% increase. To calculate the previous dividend, first, we need to reverse the dividend increase. If the new dividend is $1.50 after a 4% increase, then last year's dividend would be $1.50 divided by 1.04 (since 4% increase means the new dividend is 104% of the old dividend).

Last year's divided per share = $1.50 / 1.04 = $1.4423 approximately.

However, due to the stock split, each original share is now divided into four shares. Therefore, to get the original dividend per share, we need to multiply the dividend back by four.

Pre-split dividend per share = $1.4423 x 4 = $5.7692 approximately.