Payout Ratio and Book Value per Share Divac Company has developed a statement of

Question

Payout Ratio and Book Value per Share Divac Company has developed a statement of stockholders' equity for the year 2014 as follows: Divac's preferred stock is $100 par, 8% stock. If the stock is liquidated or redeemed, stockholders are entitled to $120 per share. There are no dividends in arrears on the stock. The common stock has a par value of $5 per share. Assume that the common stockholders have a right to the total net income of $80,000. Required: Determine the dividend payout ratio for the common stock. Round the payout ratio to four decimal places, but enter as a percentage to two decimal places. For example,.34678 rounds to.3468 and would be entered as 34.68, indicating 34.68%. Determine the book value per share of Divac's common stock. Round the book value per share to two decimals.

Explanation / Answer

1)

Dividend Payout Ratio = (Cash Dividend + Stock Dividend)/Net Income

Dividend Payout Ratio = (45000+15000)/80000

Dividend Payout Ratio = 75%

2)

No of Common Stock outstanding = Common Stock /par value

No of Common Stock outstanding = 500000/10

No of Common Stock outstanding = 50000

Book Value per share = (Common Stock + Paid in Capital + Retained Earning)/Common Stock outstanding

Book Value per share = (500000+50000+220000)/50000

Book Value per share = $ 15.40

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.