Distributions to Shareholders: Stock Dividends and Stock Splits

Although there is little empirical evidence to support the contention, there is a widespread belief that an optimal price range exists for stocksmeaning that within this range the price/earnings ratio and therefore the firm's value will be maximized. Two such tools to use for this purpose are stock dividends and stock splits. They are often used to lower a firm's stock price, and at the same time, to conserve the firm's cash resources. A stock -Select-dividendsplitItem 1 is an action taken by a firm to increase the number of shares outstanding, such as doubling the number of shares outstanding by giving each stockholder two new shares for each one formerly held. A stock -Select-dividendsplitItem 2 also divides the pie into smaller slices without affecting the fundamental position of the current stockholders but shareholders receive additional shares of stock rather than cash. Stock -Select-dividendssplitsItem 3 used on a regular annual basis keep the stock price more or less constrained. Stock -Select-dividendssplitsItem 4 are generally used after a sharp price run-up to produce a large price reduction. A recent Bloomberg BusinessWeek article states that stock -Select-dividendssplitsItem 5 have become a lot less popular in recent years because individual investors have moved from purchasing individual company shares to purchasing shares in mutual funds. Institutional investors are less likely to value stock -Select-dividendssplitsItem 6 .

Quantitative Problem: After a 4-for-1 stock split, Perry Enterprises paid a dividend of $2.20 per new share, which represents a 6% increase over last year's pre-split dividend. What was last year's dividend per share? Round your answer to the nearest cent. $