Brooks Sporting Inc. is prepared to report the following 2016 income statement (shown in thousands of dollars). Sales Operating costs including depreciation EBIT Interest EBT Taxes (40%) Net income X Open spreadsheet Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 530000 shares of stock outstanding, and its common stock trades at $47 per share. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. $ $19800 14850 $4950 330 a. The company had a 40% dividend payout ratio in 2015. If Brooks wants to maintain this payout ratio in 2016, what will be its per-share dividend in 2016? Round your answer to the nearest cent. $4620 1848 $2772 % $ b. If the company maintains this 40% 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 $2.45 million in 2015. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2015? Round your answer to the nearest cent.

Brooks Sporting Inc. is prepared to report the following 2016 income statement (shown in thousands of dollars). Sales Operating costs including depreciation EBIT Interest EBT Taxes (40%) Net income X Open spreadsheet Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 530000 shares of stock outstanding, and its common stock trades at $47 per share. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. $ $19800 14850 $4950 330 a. The company had a 40% dividend payout ratio in 2015. If Brooks wants to maintain this payout ratio in 2016, what will be its per-share dividend in 2016? Round your answer to the nearest cent. $4620 1848 $2772 % $ b. If the company maintains this 40% 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 $2.45 million in 2015. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2015? Round your answer to the nearest cent.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter9: Projecting Financial Statements

Section: Chapter Questions

Problem 1bM

See similar textbooks

Similar questions

c) suppose Zenos Manufacturing is contemplating investing in a new business. An existing company in the target industry has an equity beta of 0.90 but is very conservatively financed with a market value, equity-to-value ratio 95%. Zenos intends to use an equity-to-value ratio of 30%. What beta should Zeno use in estimating a cost of capital in the new business. d) State a reason that the cost of external equity is greater than the cost of internal equity?
You are trying to determine the optimal dividend policy for your all equity financed company using a PE multiples approach. You consider your company to be a stable growth rate firm. Your return on reinvested earnings is 14% and your required rate of return on equity is 20%. You have two choices: (i) pay a 90% dividend; or (ii) pay a 70% dividend. Which dividend policy maximizes the value of the company’s stock? Question 1 options: a) 90% dividend because it leads to a lower PE multiple b) 90% dividend because it leads to a higher PE multiple c) 70% dividend because it leads to a lower PE multiple d) 70% dividend because it leads to a higher PE multiple
REH Corporation's most recent dividend was $2.26 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. a. Do nothing, which will leave the key financial variables unchanged. b. Invest in a new machine that will increase the dividend growth rate to 9%and lower the required return to 11%. c. Eliminate an unprofitable product line, which will increase the dividend growth rate to 8% and raise the required return to 17%. d. Merge with another firm, which will reduce the growth rate to 2% and raise the required return to 18%. e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 9% and increase the required return to 17%.
[multiple choice questions] INDO Inc. always pays all of its earnings as dividends, and therefore has no retained earnings. The same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity. The targeted capital structure consists of: common stock, preferred stock, and debt. Which of the following events will reduce WACC? a. The market risk premium is decreasing. b. Flotation costs associated with issuing new common stock increase. c. The company's beta is increasing. d. Inflation is expected to increase. e. The flotation costs associated with issuing preferred stock increase.
High Adventure is considering a new project that is similar in risk to the firm's current operations. Thefirm maintains a debt-equity ratio of .55 and retains all profits to fund the firm's rapid growth. Howshould the firm determine its cost of equity?Select one:a. By averaging the costs based on the dividend growth model and the capital asset pricing model.b. By adding the market risk premium to the after tax cost of debt.c. By using the dividend growth model.d. By using the capital asset pricing model.e. By multiplying the market risk premium by 1.55
which one is correct please confirm? QUESTION 1 Zappin’ Skeeters Corporation needs to know its cost of retained earnings. Based on the following information, compute the cost of retained earnings: The stock sells for $25, flotation costs are $3, and the firm is in the 35% tax bracket. Year Dividend 2014 $1.55 2013 $1.40 2012 $1.35 2011 $1.32 a. 12.56% b. 10.72% c. 9.11% d. 15.71%
A company’s common stock is currently selling at $40 per share. Its most recent dividend was $1.60, and the financial community expects that its dividend will grow at 10% per year in the foreseeable future. What is the company’s equity cost of retained earnings? If the company sells new common stock to finance new projects and most pay $2 per share in flotation costs, what is the cost of equity? Be sure to include your work for all calculations.
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and gL = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings? Group of answer choices 12.94% 11.68% 12.30% 13.59% 11.10%
The Stieben Company has determined that the following will be true next year: T(ratio of total assets of sales)=1 P(net profit of margin)=5% d(dividend pay out ratio)=50% L(debt equity ratio)=1 a) What is Stieben's sustainable growth rate in sales? b)Can Stieben's actual growth rate in sales be different from its sustainable growth rate? Why or why not? c) How can Stieben change its sustainable growth?
Samuel Inc., hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $0.85; P0 = $22.00; and g = 6.00% (constant). The CEO thinks, however, that the stock price is temporarily depressed, and that it will soon rise to $34.00. Based on the DCF approach, by how much would the cost of equity from retained earnings change if the stock price changes as the CEO expects? Do not round your intermediate calculations.
Schalheim Sisters Inc. has always paid out all of its earnings as dividends; hence, the firm has no retained earnings. This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would REDUCE its WACC? A. The flotation costs associated with issuing preferred stock increase. B. The company's beta increases. C. The flotation costs associated with issuing new common stock increase. D. The market risk premium declines. E. Expected inflation increases.
Which step would mitigate the firm’s need to raise new ordinary shares? A. Increasing the firm’s dividend payout ratio for next year. B. Reducing the firm’s debt ratio for next year. C. Increasing the firm’s proposed capital budget. D. All of the above E. None of above