Loblaw Companies Limited is Canada?s food and pharmacy leader and the nation?s largest retailer. The company operates stores such as Real Canadian Superstore and Shoppers Drug Mart in communities across Canada. In 2017, Loblaw renewed its application to repurchase up to 21 million more common shares after 15.5 million and 10.3 million were repurchased and cancelled in 2017 and 2016, respectively. Financial information for Loblaw for the years ended December 31, 2017, and 2016 follows (in millions of dollars except per share data):

Instructions

a. Explain the different eff ects that a cash dividend, stock dividend, and stock split would have on Loblaw?s assets, liabilities, shareholders? equity, and the number of shares outstanding.

b. What is the likely reason that Loblaw has repurchased its common shares?

c. During the fiscal periods ended December 31, 2016, and 2017, Loblaw repurchased and cancelled a total of 25,820,827 common shares. In 2015, the common share market price per share was $65.34; in 2016, it was $70.84; and in 2017, it was $68.22. In 2015, the dividend declared per common share was $0.995; in 2016, it was $1.03; and in 2017, it was $1.07. Comment on the impact the reacquisition may have had on the market price and dividends per share.

d. Based on the following excerpt from the notes to the financial statements of Loblaw (in millions of dollars except common share data) for the year ended December 31, 2017, on the share reacquisition, did the company pay more than the average per share amount or less than the average per share amount to repurchase the common shares in 2017 and 2016? Explain.

e. Calculate the return on shareholders? equity, earnings per share, and payout ratio for the shareholders for 2017 and 2016. Comment on the company?s profitability. Shareholders? equity at January 2, 2016 (2015 fi scal year end) was $13,124.

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2017 2016 Profit for the year Shareholders' equity at December 31 Dividends declared to common shareholders Number of common shares outstanding Weighted average number of common $ 1,526 $13,052 $ 421 $ 990 $13,028 $ 416 399.7 385.5 shares outstanding 393.8 405.1 2017 2016 Common shares repurchased for cancellation Repurchase resulted in a reduction of: Share capital Retained earnings 15,533,527 10,287,300 $ 301 $198 510 Total cost 790 $1,091 $708