Brooks Sporting Inc. is prepared to report the following 2016 income statement (shown in thousands of dollars). Sales Operating costs including depreciation $11900 9044 EBIT Interest EBT $2856 231 $2625 1050 $1575 Taxes (40%) Net income Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 350000 shares of stock outstanding, and its common stock trades at $51 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. B19 1 Dividends 3 4 Dollars in Thousands: Tax rate Operating cost % Common shares outstanding Common stock price Dividend payout ratio 40.00% 76.00% 350,000 $51.00 55.00% 7 8 10 Sales 11 Operating costs 12 EBIT 13 Interest 14 EBT 15 Taxes 16 Net income 17 18 Calculation of current per share dividend: 19 DPS, current year $11,900 9,044 $2,856 231 $2,625 1,050 $1,575 Formulas #N/A 21 22 Current dividend yield calculation: Current dividend yield #N/A Calculation of last year's per share dividend: Last year's net income DPS last year $1,300 #N/A 28 29 Calculation of dividend payout ratio based on last year's per share dividend: Dividend payout ratio on current net income #N/A a. The company had a 55% 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. $ 0x b. If the company maintains this 55% payout ratio, what will be the current dividend yield on the company's stock? Round your answer to two decimal places. 0 % c. The company reported net income of $1.3 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. $ 0 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. 18% 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? I. 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. II. 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
