1.

Moon and Sons Inc. earned $200 million last year and retained $100 million.

What is the payout ratio? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Payout ratio

%

2.

Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as follows:

Assets
Cash	$	323,000
Accounts receivable		851,000
Fixed assets		992,000
Total assets	$	2,166,000
Liabilities and Stockholders' Equity
Accounts payable	$	510,000
Long term payable		296,000
Common stock (280,000 shares at $1 par)		280,000
Retained earnings		1,080,000
Total liabilities and stockholders' equity	$	2,166,000

a-1. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)

	Dividends per share

a-2. Is this realistic?

	Yes
	No

b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)

	Dividends per share

c. Assume the firm earned an 12 percent return on stockholders equity last year. If the board wishes to pay out 70 percent of earnings in the form of dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)

	Dividends per share

3.

Ace Products sells marked playing cards to blackjack dealers. It has not paid a dividend in many years, but is currently contemplating some kind of dividend.

The capital accounts for the firm are as follows:

Common stock (2,100,000 shares at $5 par)	$	10,500,000
Capital in excess of par*		3,000,000
Retained earnings		26,500,000
Net worth	$	40,000,000

*The increase in capital in excess of par as a result of a stock dividend is equal to the new shares created times (Market price Par value).

The companys stock is selling for $20 per share. The company had total earnings of $4,200,000 during the year. With 2,100,000 shares outstanding, earnings per share were $2. The firm has a P/E ratio of 10.

a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. (Do not round intermediate calculations. Input your answers in dollars, not millions (e.g. $1,230,000).)

Common stock
Capital in excess of par
Retained earnings
Net worth

b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.) (Do not round intermediate calculations and round your answers to 2 decimal places.)

EPS
Stock price

c. How many shares would an investor end up with if he or she originally had 130 shares? (Do not round intermediate calculations and round your answer to the nearest whole share.)

Number of shares

d. What is the investor's total investment worth before and after the stock dividend if the P/E ratio remains constant? (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

	Total Investment
Before stock dividend
After stock dividend