Bowles Sporting Inc. is prepared to report the following income statement (shown

Question

Bowles Sporting Inc. is prepared to report the following income statement (shown in thousands of dollars) for the year 2009.

Sales $15,200
Operating Costs including depreciation 11,900
EBIT 3,300
Interest 300
EBT 3,000
Taxes (40%) 1,200
Net Income $1,800

Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 500,000 shares of stock outstanding, and its stock trades at $48 per share.

a. The company had a 40% dividend payout ratio in 2008. If Bowles wants to maintain this payout ratio in 2009, what will be its per-share dividend in 2009?

Explanation / Answer

dividend payout ratio is the amount of dividends paid to stockholders relative to the amount of total net income of a company. Net income in 2009 = $1,800,000 Dividend payout = 40%*$1,800,000 = $720000 Number of shares outstanding = 500000 Dividend per share = 720000/500000 = $1.44

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