As stated in this chapter, a corporation's board of directors decides the dividend policy for the corporation. Through 2003, Costco had never paid a dividend. Beginning in the third quarter of 2004, Costco began paying quarterly dividends. One ratio of interest to stockholders is the dividend yield. It is calculated as: dividend per share ÷ market price per share = dividend yield.

Instructions: 

1. Look at Costco's Balance Sheet on page B-6 to determine the number of shares of common stock issued and outstanding as of September 3, 2006.

2. In 2006, Costco's board of directors declared and paid dividends of $.49 per share of common stock. Using the number of shares of common stock that were issued and outstanding at the end of 2006, calculate the total dividends Costco would have paid that year.

3. The highest price for Costco's stock in 2006 was $57.58 per share. Calculate the dividend yield for Costco for 2006.

4. Look at Costco's Statement of Stockholders' Equity, on page B-8, and locate the dollar amount of cash dividends actually paid in the year ending September 3, 2006. How does your amount of total dividends calculated in part 2, above, compare with the actual cash dividends paid? Why do you think the two amounts are different?

Data from Appendix B page B-6

Data from Appendix B page B-8

Transcribed Image Text:

COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except par value) ASSETS September 3, 2006 August 28, 2005 CURRENT ASSETS Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Total current assets PROPERTY AND EQUIPMENT $ 1,510,939 1,322,181 565,373 4,568,723 $ 2,062,585 1,397,272 529,150 4,014,699 264,866 234,295 8,232,082 8,238,001 Land.... 2,747,396 2,502,247 Buildings, leasehold and land improvements 6,241,357 5,622,439 Equipment and fixtures 2,405,229 2,181,740 Construction in progress 248,454 180,604 11,642,436 10,487,030 Less accumulated depreciation and amortization (3,078,141) (2,696,838) Net property and equipment 8,564,295 7,790,192 OTHER ASSETS 698,693 637,012 $17,495,070 $16,665,205