Bowles Sporting Inc. is prepared to report the following 2012 income statement (
ID: 2685900 • Letter: B
Question
Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in thousands of dollars). Sales $16,500 Operating costs including depreciation 12,870 EBIT $3,630 Interest 330 EBT $3,300 Taxes (40%) 1,320 Net income $1,980 Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 320,000 shares of stock outstanding, and its stock trades at $55 per share. The company had a 25% dividend payout ratio in 2011. If Bowles wants to maintain this payout ratio in 2012, what will be its per-share dividend in 2012? Round your answer to the nearest cent. $ If the company maintains this 25% payout ratio, what will be the current dividend yield on the company's stock? Round your answer to two decimal places. % The company reported net income of $1.75 million in 2011. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2011? Round your answer to the nearest cent. $ As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share dividend in 2012 that it paid in 2011. If it chooses this policy, what will be the company's dividend payout ratio in 2012? Round your answer to two decimal places. %Explanation / Answer
Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in thousands of dollars). Sales $16,500 Operating costs including depreciation 12,870
EBIT $3,630
Interest 330
EBT $3,300
Taxes (40%) 1,320
Net income $1,980
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 320,000 shares of stock outstanding, and its stock trades at $55 per share. T
he company had a 25% dividend payout ratio in 2011.
a. The company had a 40% dividend payout ratio in 2005. If Bowles wants to maintain this
payout ratio in 2005, what will be its per share dividend in 2006?
Total dividends05 = Net income05 × Payout ratio
= $1,980,000 × 0.25
= $495,000.
DPS06 = Dividends06/Shares outstanding
= $495,000/320,000
= $1.546.
If Bowles wants to maintain this payout ratio in 2012, what will be its per-share dividend in 2012? Round your answer to the nearest cent. $
Dividend yield = DPS/P0
= $1.54/$55.00=0.028
= 2.8%.
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