You have just obtained financial information for the past 2 years for Bridgewater Equine Corporation. Answer the following questions.

How can you explain the large increase in dividends in 2007?

Bridgewater Equine Corporation: Income Statements for Year Ending

December 31 (Millions of Dollars)

2007 2006

Sales $1,200.0 $1,000.0

Operating costs excluding depreciation 1,020.0 850.0

Depreciation 30.0 25.0

Earnings before interest and taxes $ 150.0 $ 125.0

Less interest 21.7 20.2

Earnings before taxes $ 128.3 $ 104.8

Taxes (40%) 51.3 41.9

Net income available to common stockholders $ 77.0 $ 62.9

Common dividends $ 60.5 $ 4.4

Assets

Cash and equivalents $ 12.0 $ 10.0

Short-term investments 0.0 0.0

Accounts receivable 180.0 150.0

Inventories 180.0 200.0

Total current assets $372.0 $360.0

Net plant and equipment 300.0 250.0

Total assets $672.0 $610.0

Liabilities and Equity

Accounts payable $108.0 $90.0

Notes payable 67.0 51.5

Accruals 72.0 60.0

Total current liabilities $247.0 $201.5

Long-term bonds 150.0 150.0

Total liabilities $397.0 $351.5

Common stock (50 million shares) 50.0 50.0

Retained earnings 225.0 208.5

Common equity $275.0 $258.5

Total liabilities and equity $672.0 $610.0