Harte Textiles Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its

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Harte Textiles Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclical downturn 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 past 2 years.

2019 2018 Earnings available for common stockholders Number of shares outstanding Earnings per share Market price per sh

a. How many shares should the company have outstanding in 2019 if its earnings available for common stockholders in that year are $1,200,000 and it pays a dividend of $2.00, given that its desired payout ratio is 40%?
b. How many shares would Harte have to repurchase to have the level of shares outstanding calculated in part a?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Principles of Managerial Finance

ISBN: 978-0134476315

15th edition

Authors: Chad J. Zutter, Scott B. Smart

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