On January 1,Year 1 you bought 100 shares of Universal Exports Inc.It is now January 1 of Year 2.You have recorded stock price and dividend information for Universal in the table,below.You want to calculate your return on the investment.After digging through your records you realize that Universal executed a 3-for-1 stock split late in Year 1.Use this information to adjust the data in the table and calculate the split-adjusted annual return on the investment in Universal shares.
Selected Financial Data
Universal Exports Inc.

Question

Quizplus · Accepted Answer

The price after a split is given by: P_A = 11ea7fdb_fc57_a965_a768_ad04c344b926_TB2902_11 Where P_B = the price before S = the split ratio In this example, S = 3 (a 3-for-1 split), so we can adjust the stock price in Year 2 to see what it would have been had the split not happened. P₂ = $8 × 3 = $24 The dividends were also affected by the split. They were cut by two thirds. Thus, without the split the dividend would have been: D₂ = $0.40 × 3 = $1.20 The split-adjusted return with dividends is: k₁ = 11ea7fdb_fc57_a966_a768_bdcd434e6d14_TB2902_11 = 1.10

On January 1,Year 1 You Bought 100 Shares of Universal