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Assignment: HW 12 ­ Ch 15

 

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Problem 15­7

 

Dividends

 

Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in

 

thousands of dollars).

 

Sales

 

$12,200

 

Operating costs including depreciation

 

8,784

 

EBIT

 

$3,416

 

Interest

 

231

 

EBT

 

$3,185

 

Taxes (40%)

 

1,274

 

Net income

 

$1,911

 

Prior to reporting this income statement, the company wants to determine its annual

 

dividend. The company has 580,000 shares of stock outstanding, and its stock trades at $43

 

per share.

 

a. The company had a 60% dividend payout ratio in 2011. If Bowles wants to maintain this

 

payout ratio in 2012, what will be its per­share dividend in 2012? Round your answer to

 

the nearest cent.

 

$

 

b. If the company maintains this 60% payout ratio, what will be the current dividend yield

 

on the company's stock? Round your answer to two decimal places.

 

%

 

c. The company reported net income of $1.75 million in 2011. Assume that the number of

 

shares outstanding has remained constant. What was the company's per­share dividend

 

in 2011? Round your answer to the nearest cent.

 

$

 

d. As an alternative to maintaining the same dividend payout ratio, Bowles is considering

 

maintaining the same per­share dividend in 2012 that it paid in 2011. If it chooses this

 

policy, what will be the company's dividend payout ratio in 2012? Round your answer to

 

two decimal places.

 

%

 

e. Assume that the company is interested in dramatically expanding its operations and that

 

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