Brooks Sporting Inc is prepared to report the following 2016 income statement (shown in thousands of dollars) Sales $20000 Operating costs including depreciation 14400 EBIT $5600 Interest 330 EBT $5270 Taxes (40 ) 2108 Net income $3162 Prior to reporting this income statement, the company wants to determine its annual dividend The company has 550000 shares of stock outstanding, and its common stock trades at $55 per share The data has been collected in the Microsoft Excel Online file below Open the spreadsheet and perform the required analysis to answer the questions below Open spreadsheet Dividends Dollars in Thousands Tax rate 40 00 Operating cost 72 00 Common shares outstanding 550,000 Common stock price $55 00 Dividend payout ratio 30 00 Sales $20,000 Operating costs 14,400 EBIT $5,600 Interest 330 EBT $5,270 Taxes 2,108 Net income $3,162 Calculation of current per share dividend Formulas DPS, current year N A Current dividend yield calculation Current dividend yield N A Calculation of last year's per share dividend Last year's net income $2,850 DPS last year N A Calculation of dividend payout ratio based on last year's per share dividend Dividend payout ratio on current net income N A The company had a 30 dividend payout ratio in 2015 If Brooks wants to maintain this payout ratio in 2016, what will be its per share dividend in 2016 Round your answer to the nearest cent $ If the company maintains this 30 payout ratio, what will be the current dividend yield on the company's stock Round your answer to two decimal places The company reported net income of $2 85 million in 2015 Assume that the number of shares outstanding has remained constant What was the company's per share dividend in 2015 Round your answer to the nearest cent $ As an alternative to maintaining the same dividend payout ratio, Brooks is considering maintaining the same per share dividend in 2016 that it paid in 2015 If it chooses this policy, what will be the company's dividend payout ratio in 2016 Round your answer to two decimal places Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital The company would like to avoid transactions costs involved in issuing new equity Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per share dividend Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain a constant dividend payout ratio Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain the same per share dividend

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Posted on Oct 03, 2024

Brooks Sporting Inc. is prepared to report the following 2016 income statement (shown in thousands of dollars). Sales $20000 Operating costs including depreciation 14400 EBIT

Brooks Sporting Inc. is prepared to report the following 2016 income statement (shown in thousands of dollars).

Sales	$20000
Operating costs including depreciation	14400
EBIT	$5600
Interest	330
EBT	$5270
Taxes (40%)	2108
Net income	$3162

Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 550000 shares of stock outstanding, and its common stock trades at $55 per share. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

Dividends

Dollars in Thousands:
Tax rate	40.00%
Operating cost %	72.00%
Common shares outstanding	550,000
Common stock price	$55.00
Dividend payout ratio	30.00%

Sales	$20,000
Operating costs	14,400
EBIT	$5,600
Interest	330
EBT	$5,270
Taxes	2,108
Net income	$3,162

Calculation of current per share dividend:		Formulas
DPS, current year		#N/A

Current dividend yield calculation:
Current dividend yield		#N/A

Calculation of last year's per share dividend:
Last year's net income	$2,850
DPS last year		#N/A

Calculation of dividend payout ratio based on last year's per share dividend:
Dividend payout ratio on current net income		#N/A

The company had a 30% dividend payout ratio in 2015. If Brooks wants to maintain this payout ratio in 2016, what will be its per-share dividend in 2016? Round your answer to the nearest cent.

$
If the company maintains this 30% payout ratio, what will be the current dividend yield on the company's stock? Round your answer to two decimal places.

%
The company reported net income of $2.85 million in 2015. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2015? Round your answer to the nearest cent.

$
As an alternative to maintaining the same dividend payout ratio, Brooks is considering maintaining the same per-share dividend in 2016 that it paid in 2015. If it chooses this policy, what will be the company's dividend payout ratio in 2016? Round your answer to two decimal places.

%
Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend?
1. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain a constant dividend payout ratio.
2. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain the same per-share dividend.