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Posted by: johnsonj
Price Quoted by Student: $1
Posted On: 2011-06-03 08:08:27
 
Question

Dividends: Bowles Sporting Inc. is prepared to report the following income statement (shown in thousands of dollars) for the year 2006

Sales $15,200

Operating costs including depreciation $11,900

EBIT $ 3,300

Interest 300

EBT $ 3,000

Taxes (40 percent) $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 2005. If Bowles wants to maintain this payout ratio in 2006, what will be its per share dividend in 2006?

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 2005. Assume that the number of shares outstanding has remained

 d. As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share dividend in 2006 that is paid in 2005. If it chooses this policy, what will be the company’s dividend payout ratio in 2006?

constant. What was the company’s per share dividend in 2005?


Solutions
a.Total dividends06 = Net income06 ´ Payout ratio
Price $5
Attachment 1: Bowles.doc
Solution Posted By: Johnsonj    Posted on: 03-06-2011