Q2

You are considering investing in well-established company called Rainbow Bridge Co. The Company has a dividend per share of $3.10, earnings per share of $8.50, a book value per share of $12.00 and a market price per share of $22.00.

a) Calculate the companys dividend payout ratio. Show your work

b) What information does this ratio provide?

c) What is the companys dividend yield? Show your work

d) What information does the dividend yield ratio provide?

In answering parts b) and d), do not simply restate the items used in the calculations in parts a and c.

Q3

On January 1, Dolly Dagger Co. bought equipment for $130,000. It paid $9,100 in sales tax. Transportation charges to deliver the equipment were $450, and installation and testing costs totaled $2,450. The estimated useful life is 8 years and the estimated salvage value is $16,000.

A. By how much will Dolly Daggers Equipment account increase as a result of this purchase?