Given the earnings per share over the period 2014-2021 shown in the following table, determine the...

 

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Given the earnings per share over the period 2014-2021 shown in the following table, determine the annual dividend per share under each of the policies set forth in parts a through d. Year 2021 2020 2019 2018 2017 2016 2015 2014 Earnings per share $1.40 1.56 1.20 -0.85 1.05 0.60 1.00 0.44 1. Pay out 50% of earnings in all years with positive earnings. 2. Pay $0.50 per share and increase to $0.60 per share whenever earnings per share rise above $0.90 per share for two consecutive years. 3. Pay $0.50 per share except when earnings exceed $1.00 per share, in which case pay an extra dividend of 60% of earnings above $1.00 per share. 4. Combine the policies described in parts b and c. When the dividend is raised (in part b), raise the excess dividend base (in part c) from $1.00 to $1.10 per share. 5. Compare and contrast each of the dividend policies described in parts a through d. LG5 P14-12 Stock dividend: Firm Columbia Paper has the following stockholders' equity account. The firm's common stock has a current market price of $30 per share. Preferred stock Common stock (10,000 shares at $2 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity 1. Show the effects on Columbia of a 5% stock dividend. 2. Show the effects of (1) a 10% and (2) a 20% stock dividend. 3. In light of parts a and b, discuss the effects of stock dividends on stockholders' equity. LG5 P14-13 Cash versus stock dividend Milwaukee Tool has the following stockholders' equity account. The firm's common stock currently sells for $4 per share. Preferred stock Common stock (400,000 shares at $1 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $100,000 20,000 280,000 100,000 $500,000 $ 100,000 400,000 200,000 320,000 $1,020,000 1. Show the effects on the firm of a cash dividend of $0.01, $0.05, $0.10, and $0.20 per share. 2. Show the effects on the firm of a 1%, 5%, 10%, and 20% stock dividend. 682 3. Compare the effects in parts a and b. What are the significant differences between the two methods of paving dividends? 683 Summary: Payout Policy Personal Finance Problem LG5 P14-14 Stock dividend: Investor Sarah owns 400 shares of Nutri-Foods. The firm has 40,000 shares outstanding. The firm most recently had earnings available for common stockholders of $80,000, and its stock has been selling for $22 per share. The firm intends to retain its earnings and pay a 10% stock dividend. 1. How much does the firm currently earn per share? 2. What proportion of the firm does Sarah currently own? 3. What proportion of the firm will Sarah own after the stock dividend? Explain. 4. What should be the stock price after the stock dividend? 5. Discuss what effect, if any, the payment of stock dividends will have on Sarah's share of the ownership and earnings of Nutri-Foods. Personal Finance Problem LG5 P14-15 Stock dividend: Investor Security Data Company has 50,000 shares of common stock worth $40 per share. The firm most recently had earnings available for common stockholders of $120,000, but it has decided to retain these funds and is considering either a 5% or a 10% stock dividend in lieu of a cash dividend. 1. Determine the firm's current earnings per share. 2. If Sam now owns 500 shares, determine his proportion of ownership currently and under each of the proposed stock dividend plans. Explain your findings. 3. Calculate the market price per share under each of the stock dividend plans. 4. For each of the proposed stock dividends, calculate the earnings per share after payment of the stock dividend. 683 Planner Student Home Ho... M eBooks - My Book... M Sign In | Connect |... N Free Text to Spee... Summary: Working Capital and Current Assets Management Warm-Up Exercises (89) 4K Cozy Bed... b LG2 E15-1 Everdeen Inc. has a 90-day operating cycle. If its average age of inventory is 35 days, how long is its average collection period? If its average payment period is 30 days, what is its cash conversion cycle? Place all this information on a timeline similar to Figure 15.20. LG2 E15-2 Icy Treats Inc. is a seasonal business that sells frozen desserts. At the peak of its summer selling season, the firm has $35,000 in cash, $125,000 in inventory, $70,000 in accounts receivable, and $65,000 in accounts payable. During the slow winter period, the firm holds $10,000 in cash, $55,000 in inventory, $40,000 in accounts receivable, and $35,000 in accounts payable. Calculate Icy Treats' minimum and peak funding requirements. LG3 E15-3 Mama Leone's Frozen Pizzas uses 50,000 pounds of cheese per year. Each pound costs $5.50. The ordering cost for the cheese is $250 per order, and its carrying cost is $1.50 per pound per year. Calculate the firm's economic order quantity (EOQ) for the cheese. Mama Leone's operates 250 days per year and maintains a minimum inventory level of two days' worth of cheese as a safety stock. Assuming that the lead time to receive orders of cheese is three days, calculate the reorder point. LG4 E15-4 Forrester Fashions has monthly credit sales of 20,000 units with an average collection period of 60 days. The company has a per-unit variable cost of $20 and a per-unit sale price of $30. Bad debts currently are 5% of sales. The firm estimates that a proposed relaxation of credit standards would increase the average collection period to 90 days and would increase bad debts to 7.5% of sales, which would rise to 30,000 units per month. Forrester's cost of capital is 1% per month. Show all necessary calculations needed to evaluate Forrester's proposed relaxation of credit standards. 726 Given the earnings per share over the period 2014-2021 shown in the following table, determine the annual dividend per share under each of the policies set forth in parts a through d. Year 2021 2020 2019 2018 2017 2016 2015 2014 Earnings per share $1.40 1.56 1.20 -0.85 1.05 0.60 1.00 0.44 1. Pay out 50% of earnings in all years with positive earnings. 2. Pay $0.50 per share and increase to $0.60 per share whenever earnings per share rise above $0.90 per share for two consecutive years. 3. Pay $0.50 per share except when earnings exceed $1.00 per share, in which case pay an extra dividend of 60% of earnings above $1.00 per share. 4. Combine the policies described in parts b and c. When the dividend is raised (in part b), raise the excess dividend base (in part c) from $1.00 to $1.10 per share. 5. Compare and contrast each of the dividend policies described in parts a through d. LG5 P14-12 Stock dividend: Firm Columbia Paper has the following stockholders' equity account. The firm's common stock has a current market price of $30 per share. Preferred stock Common stock (10,000 shares at $2 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity 1. Show the effects on Columbia of a 5% stock dividend. 2. Show the effects of (1) a 10% and (2) a 20% stock dividend. 3. In light of parts a and b, discuss the effects of stock dividends on stockholders' equity. LG5 P14-13 Cash versus stock dividend Milwaukee Tool has the following stockholders' equity account. The firm's common stock currently sells for $4 per share. Preferred stock Common stock (400,000 shares at $1 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $100,000 20,000 280,000 100,000 $500,000 $ 100,000 400,000 200,000 320,000 $1,020,000 1. Show the effects on the firm of a cash dividend of $0.01, $0.05, $0.10, and $0.20 per share. 2. Show the effects on the firm of a 1%, 5%, 10%, and 20% stock dividend. 682 3. Compare the effects in parts a and b. What are the significant differences between the two methods of paving dividends? 683 Summary: Payout Policy Personal Finance Problem LG5 P14-14 Stock dividend: Investor Sarah owns 400 shares of Nutri-Foods. The firm has 40,000 shares outstanding. The firm most recently had earnings available for common stockholders of $80,000, and its stock has been selling for $22 per share. The firm intends to retain its earnings and pay a 10% stock dividend. 1. How much does the firm currently earn per share? 2. What proportion of the firm does Sarah currently own? 3. What proportion of the firm will Sarah own after the stock dividend? Explain. 4. What should be the stock price after the stock dividend? 5. Discuss what effect, if any, the payment of stock dividends will have on Sarah's share of the ownership and earnings of Nutri-Foods. Personal Finance Problem LG5 P14-15 Stock dividend: Investor Security Data Company has 50,000 shares of common stock worth $40 per share. The firm most recently had earnings available for common stockholders of $120,000, but it has decided to retain these funds and is considering either a 5% or a 10% stock dividend in lieu of a cash dividend. 1. Determine the firm's current earnings per share. 2. If Sam now owns 500 shares, determine his proportion of ownership currently and under each of the proposed stock dividend plans. Explain your findings. 3. Calculate the market price per share under each of the stock dividend plans. 4. For each of the proposed stock dividends, calculate the earnings per share after payment of the stock dividend. 683 Planner Student Home Ho... M eBooks - My Book... M Sign In | Connect |... N Free Text to Spee... Summary: Working Capital and Current Assets Management Warm-Up Exercises (89) 4K Cozy Bed... b LG2 E15-1 Everdeen Inc. has a 90-day operating cycle. If its average age of inventory is 35 days, how long is its average collection period? If its average payment period is 30 days, what is its cash conversion cycle? Place all this information on a timeline similar to Figure 15.20. LG2 E15-2 Icy Treats Inc. is a seasonal business that sells frozen desserts. At the peak of its summer selling season, the firm has $35,000 in cash, $125,000 in inventory, $70,000 in accounts receivable, and $65,000 in accounts payable. During the slow winter period, the firm holds $10,000 in cash, $55,000 in inventory, $40,000 in accounts receivable, and $35,000 in accounts payable. Calculate Icy Treats' minimum and peak funding requirements. LG3 E15-3 Mama Leone's Frozen Pizzas uses 50,000 pounds of cheese per year. Each pound costs $5.50. The ordering cost for the cheese is $250 per order, and its carrying cost is $1.50 per pound per year. Calculate the firm's economic order quantity (EOQ) for the cheese. Mama Leone's operates 250 days per year and maintains a minimum inventory level of two days' worth of cheese as a safety stock. Assuming that the lead time to receive orders of cheese is three days, calculate the reorder point. LG4 E15-4 Forrester Fashions has monthly credit sales of 20,000 units with an average collection period of 60 days. The company has a per-unit variable cost of $20 and a per-unit sale price of $30. Bad debts currently are 5% of sales. The firm estimates that a proposed relaxation of credit standards would increase the average collection period to 90 days and would increase bad debts to 7.5% of sales, which would rise to 30,000 units per month. Forrester's cost of capital is 1% per month. Show all necessary calculations needed to evaluate Forrester's proposed relaxation of credit standards. 726

Answer rating: 100% (QA)

To calculate the annual dividend per share under each of the given policies for the years 20142021 we will follow the instructions provided 1 Policy a ... View the full answer