Accounting (Text Only)
26th Edition
ISBN: 9781285743615
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.27EX
To determine
Dividend yield: This is the ratio which measures the amount of dividends paid relative to the market price.
To explain: The interest of investors in investing in Incorporation E, despite the cash dividends are not paid
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Stock repurchase Harte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclic down- turn in the home furnishings business. The company has maintained a constant dividend payout of $2.00 tied to a target payout ratio of 40%. Management is preparing a share repurchase recommendation to present to the firm❝s board of directors. The following data have been gathered from the last two years: 2014 2015
Earnings available for common stockholders $1,260,000 $1,200,000
Number of shares outstanding 300,000 300,000
Earnings per share $4.20 $4.00
Market price per share $23.50 $20.00
Price/earnings ratio 5.6 5.0
a. How many shares should the company have outstanding in order to combine the earnings available for common stockholders of $1,200,000 in the year 2003 and a dividend of $2.00 to produce the desired payout ratio of 40%?
b. How many shares would Harte have to repurchase to have the level of shares outstanding…
Please help solve:
Companies with excess cash often employ share repurchase plans in place of or along with cash dividends. Share repurchase plans can help investors liquidate their holdings by selling their stock to the issuing company and earning from capital gains.
Consider the case of Sixty-second Avenue Company:
Sixty-second Avenue Company has forecasted a net income of $4,800,000 for this year. Its common stock currently trades at $22 per share, and the company currently has 720,000 shares of common stock outstanding. It has sufficient funds available to pay a cash dividend, but many of its investors don't like the additional tax liability to which the dividend income subjects them.
As a result, Sixty-second Avenue’s management is considering making a share repurchase transaction in which it would buy back 85,000 shares of its outstanding shares in the open market by paying the current market share price. Assume that the repurchase transaction will have no effect on either…
Through dividends and capital gains on changes in stock market prices, investing in the capital market is one approach to boost a company's income. On September 22, 2015, a business paid IDR. 20,000,000,000 for 20,000,000 PT Liana shares at the Indonesia Stock Exchange, plus IDR. 200,000,000 in expenditures directly related to the purchase of the shares. The market price of PT Liana Shares was Rp2,050 per share on September 31, 2015. On October 1, 2015, the corporation sold all PT Liana shares for IDR. 2,100 per share due to an unexpected need for cash. A total of IDR 60,000,000 was spent on the sale.
If the shares are classed as available for sale,
a. As of September 31, 2015, what was the change in the fair value of PT Liana Shares recognized in other comprehensive income?
b. What was the PT Liana Shares cost per share on September 22, 2015? Calculations and explanations must be included!
c. On October 1, 2015, how much profit or loss was reported on the sale of PT Liana Shares?
Chapter 15 Solutions
Accounting (Text Only)
Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - How does the accounting for a dividend received...Ch. 15 - Prob. 5DQCh. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQCh. 15 - How would a debit balance in Unrealized Gain...Ch. 15 - What are the factors contributing to the trend...Ch. 15 - Prob. 10DQ
Ch. 15 - Prob. 15.1APECh. 15 - Bond investment transactions Journalize the...Ch. 15 - Prob. 15.2APECh. 15 - Stock investment transactions On September 12,...Ch. 15 - Prob. 15.3APECh. 15 - Prob. 15.3BPECh. 15 - Prob. 15.4APECh. 15 - Prob. 15.4BPECh. 15 - Prob. 15.5APECh. 15 - Prob. 15.5BPECh. 15 - Prob. 15.6APECh. 15 - Prob. 15.6BPECh. 15 - Prob. 15.1EXCh. 15 - Prob. 15.2EXCh. 15 - Prob. 15.3EXCh. 15 - Prob. 15.4EXCh. 15 - Prob. 15.5EXCh. 15 - Entries for investment in stock, receipt of...Ch. 15 - Prob. 15.7EXCh. 15 - Prob. 15.8EXCh. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Prob. 15.10EXCh. 15 - Prob. 15.11EXCh. 15 - Prob. 15.12EXCh. 15 - Prob. 15.13EXCh. 15 - Prob. 15.14EXCh. 15 - Prob. 15.15EXCh. 15 - Prob. 15.16EXCh. 15 - Fair value journal entries, trading investments...Ch. 15 - Prob. 15.18EXCh. 15 - Prob. 15.19EXCh. 15 - Prob. 15.20EXCh. 15 - Prob. 15.21EXCh. 15 - Prob. 15.22EXCh. 15 - Prob. 15.23EXCh. 15 - Prob. 15.24EXCh. 15 - Prob. 15.25EXCh. 15 - Prob. 15.26EXCh. 15 - Prob. 15.27EXCh. 15 - Prob. 15.28EXCh. 15 - Prob. 15.29EXCh. 15 - Prob. 15.1APRCh. 15 - Prob. 15.2APRCh. 15 - Stock Investment transaction, equity method and...Ch. 15 - Prob. 15.4APRCh. 15 - Prob. 15.1BPRCh. 15 - Prob. 15.2BPRCh. 15 - Stock investment transactions, equity method and...Ch. 15 - Prob. 15.4BPRCh. 15 - Selected transactions completed by Equinox...Ch. 15 - Benefits of fair value On July 16, 1998, Wyatt...Ch. 15 - International fair value accounting International...Ch. 15 - Prob. 15.3CPCh. 15 - Warren Buffett and "look-through" earnings...Ch. 15 - Prob. 15.5CP
Knowledge Booster
Similar questions
- The DRK Corporation recently developed a dividend investment plan, or DRIP. The plan allows investors to reinvest cash dividends automatically in DRK in exchange for new shares of stock. Over time, investors in DRK will be able to build their holdings by reinvesting dividends to purchase additional shares of the company. Over 1,000 companies offer dividend reinvestment plans. Most companies with DRIP charge no brokerage or service fees. In fact, the shares of DRK will be purchased at a 10% discount from the market price. A consultant for DRK estimates that 75% of DRK’s shareholders will take part in this plan, which is somewhat higher than the average. a). Evaluate DRK’s dividend investment plan. Will it increase shareholders wealth? Discuss the advantages and disadvantages involved here. b). From a shareholder point of view, what are the advantages and disadvantages of dividend reinvestment plans? What type of investor is likely to use these, and why?arrow_forwardJoel Williams follows Sonoco Products Company (NYSE: SON), a manufacturer of paper and plastic packaging for both consumer and industrial use. SON appears to have a dividend policy of recognizing sustainable increases in the level of earnings with increases in dividends, keeping the dividend payout ratio within a range of 40 percent to 60 percent. Williams also notes: SON’s most recent quarterly dividend (ex-dividend date: 15 August 2007) was $0.26, consistent with a current annual dividend of 4x $0.26 =$1.04 per year. SON’s forecasted dividend growth rate is 6.0 percent per year. With a beta of 1.13, given an equity risk premium (expected excess return of equities over the risk-free rate, E [RM] – RF) of 4.5 percent and a risk-free rate (RF)of 5 percent, SON’s required return on equity is r= RF + beta[E(RM) – RF]=5.0+1.13(4.5)=10.1 percent, using the capital asset pricing model (CAPM). Williams believes the Gordon growth model may be an appropriate model for valuing SON. Calculate…arrow_forwardP12- 3Residual dividend policy As president of Young's of California, a major clothing chain, he just received a letter from a majority shareholder. The shareholder asks about the company's dividend policy. In fact, the shareholder asked him to calculate the amount of the dividend that he is likely to pay next year. He has not yet gathered all the information on the expected payment of the dividend, but he does know the following:1. The company follows a residual dividend policy.2. The total capital budget for next year will likely be one of three amounts, depending on the results of the capital budgeting studies that are being conducted at this time. The capital expenditures amounts are $ 2, 3, and 4 million.3. The predicted level of potential retained earnings for the next year is $ 1 million.4. The target or optimal capital structure is a debt ratio of 40%.You decided to respond by sending the best information available to the shareholder.to. Describe a residual dividend policy.b.…arrow_forward
- Stockholder Payout Rations Super Duper Corporation had a string of successful years. Super Dupers executives wish to examine how its stockholders have been compensated for their contributed capital. The following information pertains to Super Duper Corporation: Required: Calculate the dividend yield, dividend payout, and total payout.arrow_forwardUse online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In this chapter's opening vignette, we discussed Apple's decision to establish a dividend payout policy in 2012 and its subsequent decisions to increase quarterly dividends and raise its repurchase program to 175 billion. Let's find out what has happened to Apple's (AAPL) dividend policy since the time of its original announcement. We can address this issue by relying on data provided on internet financial websites such as Yahoo! Finance, Morningstar.com, Google Finance, and MSN Money (www.msn.com/en-us/money/markets). You will have to use a combination of these sites to answer these questions. 6. Review the firm's annual cash flow statements. Has Apple been repurchasing stock, or has it been issuing new stock?arrow_forwardUse online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In this chapter's opening vignette, we discussed Apple's decision to establish a dividend payout policy in 2012 and its subsequent decisions to increase quarterly dividends and raise its repurchase program to 175 billion. Let's find out what has happened to Apple's (AAPL) dividend policy since the time of its original announcement. We can address this issue by relying on data provided on internet financial websites such as Yahoo! Finance, Morningstar.com, Google Finance, and MSN Money (www.msn.com/en-us/money/markets). You will have to use a combination of these sites to answer these questions. 5. Investors are more concerned with future dividends than historical dividends. Look at analysts' earnings estimates for the next year and the 5-year annual growth estimates. On the basis of these data, what would you expect Apples payout policy to be over the next 5 years? (Your answer will only be a guess based on current data.)arrow_forward
- Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In this chapter's opening vignette, we discussed Apple's decision to establish a dividend payout policy in 2012 and its subsequent decisions to increase quarterly dividends and raise its repurchase program to 175 billion. Let's find out what has happened to Apple's (AAPL) dividend policy since the time of its original announcement. We can address this issue by relying on data provided on internet financial websites such as Yahoo! Finance, Morningstar.com, Google Finance, and MSN Money (www.msn.com/en-us/money/markets). You will have to use a combination of these sites to answer these questions. 2. Compare this information with other firms in the same industry. Has Apple behaved differently from its peers, or have there been industry-wide shifts? Google Finance provides data on related companies. Click Related companies on the left-hand side of your screen, and then click. Add or remove columns to see additional data, including dividend per share and dividend yield.arrow_forwardYou are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s financial statements: Year 20X1 20X2 20X3 Operating income $ 14,000,000 $ 13,000,000 $ 13,000,000 Interest 4,600,000 3,200,000 4,600,000 Taxes 3,700,000 5,100,000 3,900,000 Preferred dividends 1,200,000 1,200,000 1,500,000 Common dividends 2,100,000 3,100,000 — Round your answers to two decimal places. 20X1: 20X2: 20X3: What does your analysis indicate about the firm’s capacity to pay preferred stock dividends? Times preferred dividend earned has each year, which indicates the firm's capacity to pay the dividend has .arrow_forwardYou are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s financial statements: Year 20X1 20X2 20X3 Operating income $ 18,000,000 $ 16,000,000 $ 14,000,000 Interest 6,500,000 5,500,000 3,300,000 Taxes 4,200,000 4,800,000 5,400,000 Preferred dividends 1,500,000 800,000 700,000 Common dividends 2,500,000 3,500,000 — Round your answers to two decimal places. 20X1: 20X2: 20X3: What does your analysis indicate about the firm’s capacity to pay preferred stock dividends? Times preferred dividend earned has (declined or increased) each year, which indicates the firm's capacity to pay the dividend has (diminished or improved)arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningFundamentals of Financial Management (MindTap Cou...FinanceISBN:9781285867977Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningFundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning