DIVIDENDS Bowles Sporting Inc. is prepared to report the following income statement (shown in… 1 answer below »

Need your ASSIGNMENT done? Use our paper writing service to score better and meet your deadlines.


Order a Similar Paper Order a Different Paper

DIVIDENDS Bowles Sporting Inc. is prepared to report the following income statement (shown in thousands of dollars) for the year 2009.

Sales

$15,200

Operating costs including depreciation

11,900

EBIT

$ 3,300

Interest

300

EBT

$ 3,000

Taxes (40%)

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 2008. If Bowles wants to maintain this payout ratio in 2009, what will be its per-share dividend in 2009?

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 2008. Assume that the number of shares outstanding has remained constant. What was the company’s per-share dividend in 2008?

d. As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share dividend in 2009 that it paid in 2008. If it chooses this policy, what will be the company’s dividend payout ratio in 2009?

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?

"Is this question part of your assignment? We can help"

ORDER NOW
Writerbay.net

Do you need help with this or a different assignment? We offer CONFIDENTIAL, ORIGINAL (Turnitin/LopesWrite/SafeAssign checks), and PRIVATE services using latest (within 5 years) peer-reviewed articles. Kindly click on ORDER NOW to receive an A++ paper from our masters- and PhD writers.

Get a 15% discount on your order using the following coupon code SAVE15


Order a Similar Paper Order a Different Paper