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Finance: Payout, Dividends, Price, Income and Balance Sheets

P16-3 Charleston Industrial revised its dividend policy and decided that it wants to maintain a retained earnings account of $1 million. The company's retained earnings account at the end of 2008 was $750,000, and its earnings available to common stockholders of $800,000 in 2009. What is Charleston Industrial's dividend payout ratio for 2009?

P16-7 Eliza Doolittle, the chief financial officer of East West Communications Corporations, has identified $14 million worth of new capital projects that the company should invest in next year. The optimal capital structure for the company is 40% debt and 60% equity. If the expected earnings for this year are $10 million, what amount of dividend should she recommend according to residual theory?

P16-8 Use the same data given in problem 16-7. Now what would be the amount of dividends that could be paid if East West's net income for this year is:

a. $16 million?
b. $6 million?

P16-10 Jan Brady, chief accountant of Mulberry Silk Products, is trying to work out the feasibility of a 20% stock dividend. The equity section of the balance sheet follows:

Common Stock (2 Million shares, $1 Par 2000
Capital in Excess of Par 8,000
Retained Earnings 10,000
Total Common Equity 20,000

The current market price of the company's stock is $31 per share. Is it possible to apy a 20% stock dividend? Is it possible to pay a 10% stock dividend? Explain?

P16-11 Use the same data given in problem 16-10. After payment of a 10% stock dividend, what will be the expected market price of the stock? Also, show how the equity section of the balance sheet will change.

P16-12 Malea Liberty has 800,000 common stock share outstanding. It has decided to declare a 30% stock dividend. The new par value is the same as the original par value, $3. Before the declared dividend, the retained earnings account was $60,000,000 and capital in excess of par was $13,600,000. The current stock price is $40 per share. Calculate the new values for the following items:

a. Number of shares of common stock?

b. Capital in excess of par?

c. Retained earnings?

P16-13 Malea Liberty market price before the declared stock dividend was $40 per share. What would be the market price after the declared stock dividend described in the problem 16-12 (Assume the total value of the firm's stock remains the same.)

Solution Summary

The following posting helps with various financial problems. Concepts covered include dividend payout ratios, dividends, stock price, balance sheets, and income.