Problem 10-03

Jersey Medical earns $8.50 a share, sells for $120, and pays a $8 per share dividend. The stock is split two for one and a $4 per share cash dividend is declared.

1. What will be the new price of the stock? Round your answer to the nearest dollar. ____??

If the firm's total earnings do not change, what is the payout ratio before and after the stock split? Round your answers to one decimal place.

1. Payout ratio before the split: %______???
2. Payout ratio after the split: %____??