Purchase Solution

Dividends

Not what you're looking for?

Ask Custom Question

Bowles Sporting Inc. is prepared to report the following income statement (shown in thousands of dollars) for the year 2009.
Sales $15,200
Operating costs including depreciation 11,900
EBIT $3,300
Interest 300
EBT $3,000
Taxes (40%) 1,200
Net income $1,800
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 500,000 shares of stock outstanding, and its stock trades at $48 per share.

a. The company had a 40% dividend payout ratio in 2008. If Bowles wants to maintain this payout ratio in 2009, what will be its per-share dividend in 2009?

b. If the company maintains this 40% payout ratio, what will be the current dividend yield on the company's stock?

c. The company reported net income of $1.5 million in 2008. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2008?

d. As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share dividend in 2009 that it paid in 2008. If it chooses this policy, what will be the company's dividend payout ratio in 2009?

e. Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or maintain the same per-share dividend?

Please show all work. Thanks!!

Purchase this Solution
Solution Summary

The solution explains some questions relating to dividends

Solution Preview

a. The total dividends paid out in 2009 = 1,800,000X40%=$720,000
Number of shares = 500,000
Dividend per share = 720,000/500,000 = $1.44

b. Dividend yield = Dividend per share/Price
= 1.44/48 = 3%

c. The dividend ...

Purchase this Solution
Free BrainMass Quizzes
Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • Dividend Computations

    Cumulative preferred: dividends in arrears and current year's dividends must be paid before common dividends can be paid. 1.

  • Computing Dividends on Preferred Stock

    299160 Bennett Company paid cash dividends totaling $150,000 in 2009 and $75,000 in 2010. 19. Bennett Company paid cash dividends totaling $150,000 in 2009 and $75,000 in 2010. In 2011, Bennett intends to pay cash dividends of $800,000.

  • Aaron Burr Corporation: common stockholders and dividends

    Amount of preference dividends= 10%*100000=$10000/- Amount of total dividends=$88000 Less: amount of preference dividends=$10000 Amount of common stock holders dividends=$78000 (b) Assuming that total dividends declared in 2007 were $88,000, and

  • Which dividend is not defined as a distribution?

    Under the revised model business corporation act, which of the following dividends is not defined as a distribution: a) cash dividends b) property dividends c) liquidating dividends d) stock dividends d) stock dividends Under this model, stock

  • Earnings per share

    Since total preferred dividends are $100,000 so all $50,000 would go towards preferred dividends. Since the dividends are non cumulative we would take only what is declared.

  • Cash dividends

    180803 Cash Dividends Amounts $30,000 cash dividends, cash dividends payable was $8,000 and $12,000 at beginning and end of the year. What is the amount of cash for the payment of dividends during the year?

  • Dividends on preferred and common stock

    dividends on common stock can be paid.

  • Multiple choice

    Firms are usually prohibited by state law from distributing 1. 1. retained earnings as dividends. 2. 2. dividends in a year the firm has a net loss. 3. 3. assets as dividends. 4. 4. paid-in capital as dividends. 3.

  • Right or Attribute of Preferred Stocks

    a) Having a claim to dividends in excess of the annual dividend requirement if dividends on common stock exceeds dividends on preferred stock b) Having a priority claim to dividends relative to the common stock's claim to dividends c) Having a priority

  • Different Types of Dividends a Company can Pay Out?

    it would pay out more dividends.

View More Related Solutions