1. Given the financial information for the A.E Neuman Corporation answer the following question: a) What is the dividend payout ratio for 2007? b) Prepare a statement of cash flows for the year ending 2007 c) If we increased the dividend payout ratio to 100% what would happen to the retained earnings at year end 2007? A.E. Neuman Corporation -- Year-end Balance Sheets ASSETS 2006 2007 Cash $ 45,000 $ 50,000 Marketable Securities 175,000 160,000 Accounts Receivable 240,000 220,000 Inventories 230,000 275,000 Investments 70,000 55,000 Plant and Equipment 1,300,000 1,550,000 Less Accumulated Depreciation -450,000 -600,000 Net Plant and Equipment 850,000 950,000 Total Assets $1,610,000 $1,710,000 LIABILITIES AND STOCKHOLDERS EQUITY Accounts Payable $ 110,000 $ 85,000 Notes Payable 65,000 10,000 Accrued Expenses 30,000 5,000 Income Taxes Payable 5,000 10,000 Bonds Payable 800,000 900,000 Common Stock (100,000 shares, $1 par) 100,000 100,000 Capital Paid in Excess of Par 100,000 100,000 Retained Earnings 400,000 500,000 Total Liabilities and Stockholders Equity $1,610,000 $1,710,000 A.E Neuman Corporation Income Statement For Year Ended December 31, 2007 Sales $5,500,000 Less: Cost of goods Sold 4,200,000 Gross Profit 1,300,000 Less: Selling and Administrative Expense 260,000 Operating Profit 1,040,000 Less: Depreciation Expense 150,000 Earnings Before Interest and Taxes 890,000 Less: Interest Expense 90,000 Earnings Before Taxes 800,000 Less: Taxes (50%) 400,000 Net Income $ 400,000 Dividends Paid $ 300,000