Question 4 (25 marks) The following table shows the common equity accounts of Smart Car Inc. $ Common stock ($1 par value) 245,000 Capital surplus 618,000 Retained earnings 2,758,300 Total owners' equity 3,621,300 a. If the company declares a 10 percent stock dividend when the market value of its stock is $51 per share, how will each of the above four accounts change after the share dividend distribution? Show your calculations. (8 marks) b. Assume instead that the company decides to have a four-for-one stock split, and subsequently pays $0.65 dividend per share on the new (postsplit) shares. It is known that the total 12 FIN B280 Introduction to Financial Management per share? dividends to be paid are 10% higher than last year's dividends. What was last year's dividend (8 marks) c. How is it possible that dividends are so important, but at the same time, dividend policy is irrelevant? Explain (5 marks) d How will a company's share price change if the company announces the following measures? Explain (4 marks) A stock repurchase program Temporary suspension of dividend payment 1 11 Question 4 (25 marks) The following table shows the common equity accounts of Smart Car Inc. $ Common stock ($1 par value) 245,000 Capital surplus 618,000 Retained earnings 2,758,300 Total owners' equity 3,621,300 a. If the company declares a 10 percent stock dividend when the market value of its stock is $51 per share, how will each of the above four accounts change after the share dividend distribution? Show your calculations. (8 marks) b. Assume instead that the company decides to have a four-for-one stock split, and subsequently pays $0.65 dividend per share on the new (postsplit) shares. It is known that the total 12 FIN B280 Introduction to Financial Management per share? dividends to be paid are 10% higher than last year's dividends. What was last year's dividend (8 marks) c. How is it possible that dividends are so important, but at the same time, dividend policy is irrelevant? Explain (5 marks) d How will a company's share price change if the company announces the following measures? Explain (4 marks) A stock repurchase program Temporary suspension of dividend payment 1 11