Overton Incorporated is prepared to report the followingincomestatement(shown in thousands of dollars) for the year2006.
Sales $15,200
Operating costsincludingdepreciation 11,900
EBIT $3,300
Interest 300
EBT $3,000
Taxes(40percent) 1,200
NetIncome 1,800
Prior to reporting the income statement, the company wantstodetermine its annual dividend. The company has 500,000 sharesofstock outstanding and its stock trades at $48 per share.
a. The company had a 40 percent dividend payout ratio in 2005.IfOverton wants to maintain this payout ratio in 2006, what willbeits per-share dividend in 2006?
b. If the company maintains this 40 percent payout ratio,whatwill be the current dividend yield on the company's stock?
c. The company reported net income of $1.5 million in2005.Assume that the number of shares outstanding has remainedconstant.What was the company's per-share dividend in 2005?
d. As an alternative to maintaining the same dividendpayoutratio, Overton is considering maintaining the sameper-sharedividend in 2006 that it paid in 2005. If it chooses thispolicy,what will be the company's dividend payout ratio in2006?
e. Assume that the company is interested indramaticallyexpanding its operations and that this expansion willrequiresignificant amounts of capital. The company would like toavoidtransactions costs involved in issuing new equity. Giventhisscenario, would it make more sense for the company to maintainaconstant dividend payout ratio or to maintain the sameper-sharedividend?
Overton Incorporated is prepared to report the followingincomestatement(shown in thousands of dollars) for the year2006.
Sales $15,200
Operating costsincludingdepreciation 11,900
EBIT $3,300
Interest 300
EBT $3,000
Taxes(40percent) 1,200
NetIncome 1,800
Prior to reporting the income statement, the company wantstodetermine its annual dividend. The company has 500,000 sharesofstock outstanding and its stock trades at $48 per share.
a. The company had a 40 percent dividend payout ratio in 2005.IfOverton wants to maintain this payout ratio in 2006, what willbeits per-share dividend in 2006?
b. If the company maintains this 40 percent payout ratio,whatwill be the current dividend yield on the company's stock?
c. The company reported net income of $1.5 million in2005.Assume that the number of shares outstanding has remainedconstant.What was the company's per-share dividend in 2005?
d. As an alternative to maintaining the same dividendpayoutratio, Overton is considering maintaining the sameper-sharedividend in 2006 that it paid in 2005. If it chooses thispolicy,what will be the company's dividend payout ratio in2006?
e. Assume that the company is interested indramaticallyexpanding its operations and that this expansion willrequiresignificant amounts of capital. The company would like toavoidtransactions costs involved in issuing new equity. Giventhisscenario, would it make more sense for the company to maintainaconstant dividend payout ratio or to maintain the sameper-sharedividend?
Related questions
Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in thousands of dollars).
| Sales | $12,700 |
| Operating costs including depreciation | 9,906 |
| EBIT | $2,794 |
| Interest | 264 |
| EBT | $2,530 |
| Taxes (40%) | 1,012 |
| Net income | $1,518 |
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 340,000 shares of stock outstanding, and its stock trades at $54 per share.
- The company had a 50% dividend payout ratio in 2011. If Bowles wants to maintain this payout ratio in 2012, what will be its per-share dividend in 2012? Round your answer to the nearest cent.
$ - If the company maintains this 50% payout ratio, what will be the current dividend yield on the company's stock? Round your answer to two decimal places.
% - The company reported net income of $1.25 million in 2011. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2011? Round your answer to the nearest cent.
$ - As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share 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.
%
Dividends
Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in thousands of dollars).
| Sales | $10,900 |
| Operating costs including depreciation | 7,957 |
| EBIT | $2,943 |
| Interest | 363 |
| EBT | $2,580 |
| Taxes (40%) | 1,032 |
| Net income | $1,548 |
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 350,000 shares of stock outstanding, and its stock trades at $54 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 per-share 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 $1.25 million in 2011. Assume that the number of shares outstanding has remained constant. What was the company's per-share 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 per-share 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 this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Selct I or II below.
I. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain the same per-share dividend.
II. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain a constant dividend payout ratio.
Dividends
Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in thousands of dollars).
| Sales | $19,100 |
| Operating costs including depreciation | 14,707 |
| EBIT | $4,393 |
| Interest | 363 |
| EBT | $4,030 |
| Taxes (40%) | 1,612 |
| Net income | $2,418 |
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 550,000 shares of stock outstanding, and its stock trades at $47 per share.
The company had a 60% dividend payout ratio in 2011. If Bowles wants to maintain this payout ratio in 2012, what will be its per-share dividend in 2012? Round your answer to the nearest cent.
$
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.
%
The company reported net income of $2.2 million in 2011. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2011? Round your answer to the nearest cent.
$
As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share 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.
%
Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend?
I. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain the same per-share dividend.
II. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain a constant dividend payout ratio.
