Required: 

1. What amount should Sherry declare in dividends for 20x4? Identify what factors influenced your decision and how they helped you in determining the dividend amount. 

2. Review the financial performance of Skinner Industries and try to identify some possible reasons why the stock price could be low. 

3. Companies sometimes repurchase their own outstanding stock. How much company stock should Sherry consider repurchasing at this time if any? Discuss why this may or may not be a good time repurchase the stock of skinner industries.

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The investors seem to like their dividend bonus that comes in early February just before the start of racing season. Many of the investors are value conscious and want a return on their investment from both dividends and stock price appreciation. Since this is a regional company focusing on a very specific market, a large number of investors are motor sport fans from the mid-Atlantic area. Sherry has always believed in a significant dividend, last year it was $700,000, and the dividend yield is over 6.0%. The company has also maintained a pretty consistent dividend payout ratio through 20x3. While everything seems to be going right for the company, with a reasonable growth rate in an exploding market plus an attractive dividend, Sherry is puzzled on why the market price of the stock at around $8 7/8 seems so low. Perhaps the overall economy, which is struggling and filled with uncertainty, is causing the price decline. Also, Sherry believes that the job market in North and South Carolina has suffered with many textile and similar jobs going overseas. In an effort to support the price of the stock and maintain the confidence of the investors, Sherry thinks it is important to retain and possibly even increase the current dividend per share for 20x4. Sherry has just received the financial statements as of December 31, 20x4 without the inclusion of a 20x4 dividend payment. She needs to determine what annual dividend payment the company should make for 20x4. She also wanted to see what happened last year so she obtained the income statement and balance sheet from 20x3 along with the balance sheet figures at the end of 20x2. The corporate tax rate is 40%. The investors seem to like their dividend bonus that comes in early February just before the start of racing season. Many of the investors are value conscious and want a return on their investment from both dividends and stock price appreciation. Since this is a regional company focusing on a very specific market, a large number of investors are motor sport fans from the mid-Atlantic area. Sherry has always believed in a significant dividend, last year it was $700,000, and the dividend yield is over 6.0%. The company has also maintained a pretty consistent dividend payout ratio through 20x3. While everything seems to be going right for the company, with a reasonable growth rate in an exploding market plus an attractive dividend, Sherry is puzzled on why the market price of the stock at around $8 7/8 seems so low. Perhaps the overall economy, which is struggling and filled with uncertainty, is causing the price decline. Also, Sherry believes that the job market in North and South Carolina has suffered with many textile and similar jobs going overseas. In an effort to support the price of the stock and maintain the confidence of the investors, Sherry thinks it is important to retain and possibly even increase the current dividend per share for 20x4. Sherry has just received the financial statements as of December 31, 20x4 without the inclusion of a 20x4 dividend payment. She needs to determine what annual dividend payment the company should make for 20x4. She also wanted to see what happened last year so she obtained the income statement and balance sheet from 20x3 along with the balance sheet figures at the end of 20x2. The corporate tax rate is 40%.

Answer rating: 100% (QA)

To determine the amount of dividends Sherry should declare for 20x4 we need to consider various factors such as the companys financial performance dividend history dividend payout ratio market conditi... View the full answer