Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Brooks Sporting Inc. is prepared to report the following 2016 Income statement (shown in thousands of dollars). Sales $10200 Operating costs including depreciation 7548 EBIT

image text in transcribed
image text in transcribed
Brooks Sporting Inc. is prepared to report the following 2016 Income statement (shown in thousands of dollars). Sales $10200 Operating costs including depreciation 7548 EBIT $2652 Interest 297 EBT $2355 Taxes (40%) 942 Net income $1413 Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 580000 shares of stock outstanding, and its common stock trades at $45 per share. The data has been collected in the Microsoft Excel Online ble below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. The company had a 40% dividend payout ratio in 2015. Ir Brooks wants to maintain this payout ratio In 2016, what will be it per dare dividend in 2016 Round your answer to the nearest cent b. If the company maintains this 40 payout ratio, what will be the current dividend yield on the company's stock round your answer to two decima places a. The company had a 40% 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. $ b. If the company maintains this 40% payout ratio, what will be the current dividend yield on the company's stock? Round your answer to two decimal places. I c. The company reported net income of $1.25 million in 2015. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 20157 Round your answer to the nearest cent. $ d. 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 % e. 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 the same pershare dividend. 11. 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurial Finance

Authors: J. Chris Leach, Ronald W. Melicher

6th edition

1305968352, 978-1337635653, 978-1305968356

More Books

Students also viewed these Finance questions