Payout Ratio and Book Value per Share Divac Company has developed a statement of stockholders’ equity for the year 2010 as follows:

Paid-In Paid-In Preferred Capital— Common Capital— Retained Stock Preferred Stock Common Earnings Balance, Jan. 1 $100,000 $50,000 $400,000 $40,000 $200,000 Stock issued 100,000 10,000 Net income 80,000 Cash dividend –45,000 Stock dividend 10,000 5,000 –15,000 Balance, Dec. 31 $110,000 $55,000 $500,000 $50,000 $220,000 Divac’s preferred stock is $100 par, 8% stock. If the stock is liquidated or redeemed, stockholders are entitled to $120 per share. There are no dividends in arrears on the stock. The common stock has a par value of $5 per share.

Required 1. Determine the dividend payout ratio for the common stock.

2. Determine the book value per share of Divac’s common stock.

AppendixLO1