Brooks Sporting Inc. is prepared to report the following 2016 income statement (shown in thousands of dollars). $$ \begin{matrix} \text{Sales} & \text{\$ 15.300}\\ \text{Operating costs including depreciation} & \text{12.240}\\ \text{EBIT} & \text{\$ 30.60}\\ \text{Interest} & \text{330}\\ \text{EBT} & \text{\$ 2.730}\\ \text{Taxes (40\\%)} & \text{1.092}\\ \text{Net income} & \text{\$ 1.638}\\ \end{matrix} $$ Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 320,000 shares of common stock outstanding, and its stock trades at $37 per share. a. The company had a 25% dividend payout ratio in 2015. If Brooks wants to maintain this payout ratio in 2016, what will be its per-share dividend in 2016? b. If the company maintains this 25% payout ratio, what will be the current dividend yield on the company’s stock? c. The company reported net income of$1.35 million in 2015.Assume that the number of shares outstanding has remained constant.What was the company’s per-share dividend in 2015? d. As an alternative to maintaining the same dividend payout ratio, Brooks is considering maintaining the same per-share dividend in 2016 that it paid in 2015. If it chooses this policy, what will be the company’s dividend payout ratio in 2016? e. Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Explain.

Brooks Sporting Inc. is prepared to report the following 2018 income statement (shown in thousands of dollars).

Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 320,000 shares of common stock outstanding, and its stock trades at 37 dollars per share.

a. The company had a 25 percent dividend payout ratio in 2017. If Brooks wants to maintain this payout ratio in 2018, what will be its per-share dividend in 2018?

b. If the company maintains this 25 percent payout ratio, what will be the current dividend yield on the company's stock?

c. The company reported net income of 1.35 million dollars in 2017. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2017?

d. As an alternative to maintaining the same dividend payout ratio, Brooks is considering maintaining the same per-share dividend in 2018 that it paid in 2017. If it chooses this policy, what will be the company's dividend payout ratio in 2018?

e. Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Explain.

Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $\$ 0.75$ out of annual earnings per share of $\$ 2.25$. Currently, Rubenstein Bros.' stock is selling for $\$ 12.50$ per share. Adhering to the company's target capital structure, the firm has $\$ 10$ million in total invested capital, of which $40 \%$ is funded by debt. Assume that the firm's book value of equity equals its market value. In past years, the firm has earned a return on equity (ROE) of $18 \%$, which is expected to continue this year and into the foreseeable future.

a. Based on this information, what long-run growth rate can the firm be expected to maintain? (Hint: $\mathrm{g}=$ Retention rate $\times$ ROE.)

b. What is the stock's required return?

c. If the firm changed its dividend policy and paid an annual dividend of $\$ 1.50$ per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE. Therefore, what must be the firm's new expected long-run growth rate and required return?

d. Suppose instead that the firm has decided to proceed with its original plan of disbursing $\$ 0.75$ per share to shareholders, but the firm intends to do so in the form of a stock dividend rather than a cash dividend. The firm will allot new shares based on the current stock price of $\$ 12.50$. In other words, for every $\$ 12.50$ in dividends due to shareholders, a share of stock will be issued. How large will the stock dividend be relative to the firm's current market capitalization? (Hint: Remember that market capitalization $=\mathrm{P}_0 \times$ number of shares outstanding.)

e. If the plan in part above is implemented, how many new shares of stock will be issued, and by how much will the company's earnings per share be diluted?

Emergency Medical’s stock trades at $145 a share. The company is contemplating a 3-for-2 stock split. Assuming that the stock split will have no effect on the market value of its equity, what will be the company’s stock price following the stock split?

Here is the condensed 2016 balance sheet for Skye Computer Company (in thousands of dollars):

$$\begin{matrix} \text{ } & \text{2016}\\ \text{Current assets} & \text{\$ 2.000}\\ \text{Net fixed assets} & \text{3.000}\\ \text{Total assets} & \text{\$ 5.000}\\ \text{Accounts payable and accruals} & \text{\$ 900}\\ \text{Short-term debt} & \text{100}\\ \text{Long-term debt} & \text{1.110}\\ \text{Preferred stock (10.000 shares)} & \text{250}\\ \text{Common stock (50.000 shares)} & \text{1.300}\\ \text{Retained earnings} & \text{1.350}\\ \text{Total common equity} & \text{\$ 2.650}\\ \text{Total liabilities and equity} & \text{\$ 5.000}\\ \end{matrix}$$

Skye’s earnings per share last year were $3.20. The common stock sells for$55.00, last year’s dividend $\left(\mathrm{D}_{0}\right)$ was $2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skye’s preferred stock pays a dividend of$3.30 per share, and its preferred stock sells for $30.00 per share. The firm’s before-tax cost of debt is 10%, and its marginal tax rate is 35%. The firm’s currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skye’s beta is 1.516. The firm’s total debt, which is the sum of the company’s short-term debt and long-term debt, equals$1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? d. If Skye continues to use the same market-value capital structure, what is the firm’s WACC assuming that (1) it uses only retained earnings for equity? (2) If it expands so rapidly that it must issue new common stock?

Gamma Industries has net income of $3,800,000, and it has 1,490,000 shares of common stock outstanding. The company’s stock currently trades at$67 a share. Gamma is considering a plan in which it will use available cash to repurchase 10% of its shares in the open market at the current $67 stock price. The repurchase is expected to have no effect on net income or the company’s P/E ratio. What will be its stock price following the stock repurchase?

Altamonte Telecommunications has a target capital structure that consists of 45% debt and 55% equity. The company anticipates that its capital budget for the upcoming year will be $1,000,000. If Altamonte reports net income of$1,200,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio?

Bowles Sporting Inc. is prepared to report the following $2015$ income statement (shown in thousands of dollars).

$$\begin{array}{lr} \text{Sales} & \$ 15,200 \\ \text{Operating costs including depreciation} & 11,900 \\ \text{EBIT} & \$ 3,300 \\ \text{Interest} & 300 \\ \text{EBT} & {\$ 3,000}\\ \text{Taxes (40 \\\%)} & 1,200 \\ \text{Net income} & \$1,800 \end{array}$$

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

a. The company had a $40 \%$ dividend payout ratio in $2014$. If Bowles wants to maintain this payout ratio in $2015$, what will be its per-share dividend in $2015$ ?

b. If the company maintains this $40 \%$ payout ratio, what will be the current dividend yield on the company's stock?

c. The company reported net income of $\$ 1.5$ million in $2014$. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in $2014$?

d. As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share dividend in $2015$ that it paid in $2014$. If it chooses this policy, what will be the company's dividend payout ratio in $2015$ ?

e. Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Explain.

Analyze advantages and disadvantages of [a] parliamentary system of government. Write a paragraph that analyzes the advantages and disadvantages of the parliamentary system of government in the United Kingdom. When writing the paragraph , consider the following: sovereignty; elections; prime minister.

Solve each system. Use any method you wish.

$$\left\{\begin{array}{l}{x^{2}-y^{2}=21} \\ {x+y=7}\end{array}\right.$$

The financial statements at the end of Wolverine Realty’s first month of operations are as follows:

$$\begin{array}{c} \textbf{Wolverine Realty}\\ \textbf{Income Statement}\\ \textbf{For the Month Ended April 30, 2014} \end{array}$$

$$\begin{array}{lrr} \text{Fees earned . . . . . . . . . . . . . . . . . . . . . .}&&\$\hspace{25pt}\text{(a)}\\ \text{Expenses:}\\ \hspace{10pt}\text{Wages expense . . . . . . . . . . . . . . . . . }&\$\hspace{5pt}\text{300,000}\\ \hspace{10pt}\text{Rent expense . . . . . . . . . . . . . . . . . . }&\text{100,000}\\ \hspace{10pt}\text{Supplies expense . . . . . . . . . . . . . . . .}&\text{(b)}\\ \hspace{10pt}\text{Utilities expense . . . . . . . . . . . . . . . . }&\text{20,000}\\ \hspace{10pt}\text{Miscellaneous expense . . . . . . . . . . . }&\underline{\hspace{15pt}\text{25,000}}\\ \hspace{20pt}\text{Total expenses . . . . . . . . . . . . . . .}&&\underline{\hspace{10pt}\text{475,000}}\\ \text{Net income . . . . . . . . . . . . . . . . . . . . . .}&&\underline{\underline{\$\hspace{5pt}\text{275,000}}}\\ \end{array}$$

$$\begin{array}{c} \textbf{Wolverine Realty}\\ \textbf{Statement of Owner’s Equity}\\ \textbf{For the Month Ended April 30, 2014} \end{array}$$

$$\begin{array}{lrr} \text{Dakota Rowe, capital, April 1, 2014 . . . . . . . . . .}&&\$\hspace{25pt}\text{(c)}\\ \text{Investment on April 1, 2014 . . . . . . . . . . . . . . . . }&\$\hspace{5pt}\text{375,000}\\ \text{Net income for April . . . . . . . . . . . . . . . . . . . . . .}&\underline{\hspace{30pt}\text{(d)}}\\ \text{}&\text{\$\hspace{25pt}(e)}\\ \text{Less withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . }&\underline{\hspace{10pt}\text{125,000}}\\ \text{Increase in owner’s equity . . . . . . . . . . . . . . . . . . }&&\underline{\hspace{35pt}\text{(f)}}\\ \text{Dakota Rowe, capital, April 30, 2014 . . . . . . . . .}&&\underline{\underline{\$\hspace{28pt}\text{(g)}}}\\ \end{array}$$

$$\begin{array}{c} \textbf{Wolverine Realty}\\ \textbf{Balance Sheet}\\ \textbf{April 30, 2014} \end{array}$$

$$\begin{array}{llr} {\textbf{\hspace{108pt}Assets}}\\ \text{Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&&\$\text{\hspace{10pt}{462,500}}\\ \text{Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . }&&\text{12,500}\\ \text{Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&&\text{\underline{\hspace{15pt}{150,000}}}\\ \text{Total assets . . . . . . . . . . . . . . . . . . . . . . . . }&&\underline{\underline{\$\hspace{27pt}\text{(h)}\hspace{2pt}}}\\ \\ {\textbf{\hspace{98pt}Liabilities}}\\ \text{Accounts payable . . . . . . . . . . . . . . . . . . . }&&\$\hspace{10pt}\text{100,000}\\ {\textbf{\hspace{84pt}Owner's Equity}}\\ \text{Dakota Rowe, capital . . . . . . . . . . . . . . . . }&&\underline{\text{\hspace{37pt}(i)}}\\ \text{Total liabilities and owner's equity . . . . . }&&\underline{\underline{\$\hspace{29pt}\text{(j)}\hspace{2pt}}}\\ \end{array}$$

$$\begin{array}{c} \textbf{Wolverine Realty}\\ \textbf{Statement of Cash Flows}\\ \textbf{For the Month Ended April 30, 2014} \end{array}$$

$$\begin{array}{lrr} \text{Cash flows from operating activities:}\\ \hspace{10pt}\text{Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&\$\hspace{35pt}\text{(k)}\\ \hspace{10pt}\text{Deduct cash payments for expenses and payments to creditors . . . . . }&\underline{\hspace{14pt}\text{(387,500)}}\\ \hspace{10pt}\text{Net cash flows from operating activities}&&\$\hspace{25pt}\text{(l)}\\ \text{Cash flows from investing activities:}\\ \hspace{10pt}\text{Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . .}&&\text{(m)}\\ \text{Cash flows from financing activities:}\\ \hspace{10pt}\text{Cash received as owner’s investment . . . . . . . . . . . . . . . . . . . . . . . . . .}&\$\hspace{35pt}\text{(n)}\\ \hspace{10pt}\text{Deduct cash withdrawal by owner . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&\underline{\hspace{40pt}\text{(o)}}\\ \hspace{10pt}\text{Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . .}&&\underline{\hspace{30pt}\text{(p)}}\\ \text{Net increase (decrease) in cash and April 30, 2014, cash balance . . . . . . . }&&\underline{\underline{\$\hspace{25pt}\text{(q)}}}\\ \end{array}$$

By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (q).

Use the formula

$$\left( \begin{array}{l}{n} \\ {r}\end{array}\right)=\frac{n !}{r !(n-r) !}$$

to evaluate:

$$\left( \begin{array}{l}{3} \\ {1}\end{array}\right)$$

The financial statements at the end of Atlas Realty’s first month of operations are as follows:

$$\begin{array}{c} \textbf{Atlas Realty}\\ \textbf{Income Statement}\\ \textbf{For the Month Ended May 31, 2014} \end{array}$$

$$\begin{array}{lrr} \text{Fees earned . . . . . . . . . . . . . . . . . . . . . .}&&\$\hspace{5pt}\text{400,000}\\ \text{Expenses:}\\ \hspace{10pt}\text{Wages expense . . . . . . . . . . . . . . . . . }&\$\hspace{25pt}\text{(a)}\\ \hspace{10pt}\text{Rent expense . . . . . . . . . . . . . . . . . . }&\text{48,000}\\ \hspace{10pt}\text{Supplies expense . . . . . . . . . . . . . . . .}&\text{17,600}\\ \hspace{10pt}\text{Utilities expense . . . . . . . . . . . . . . . . }&\text{14,400}\\ \hspace{10pt}\text{Miscellaneous expense . . . . . . . . . . . }&\underline{\hspace{20pt}\text{4,800}}\\ \hspace{20pt}\text{Total expenses . . . . . . . . . . . . . . .}&&\underline{\hspace{10pt}\text{288,000}}\\ \text{Net income . . . . . . . . . . . . . . . . . . . . . .}&&\underline{\underline{\$\hspace{24pt}\text{(b)}}}\\ \end{array}$$

$$\begin{array}{c} \textbf{Atlas Realty}\\ \textbf{Statement of Owner’s Equity}\\ \textbf{For the Month Ended May 31, 2014} \end{array}$$

$$\begin{array}{lrr} \text{LuAnn Martin, capital, May 1, 2014 . . . . . . . . . .}&&\$\hspace{25pt}\text{(c)}\\ \text{Investment on May 1, 2014 . . . . . . . . . . . . . . . . }&\$\hspace{25pt}\text{(d)}\\ \text{Net income for May . . . . . . . . . . . . . . . . . . . . . .}&\underline{\hspace{30pt}\text{(e)}}\\ \text{}&\text{\$\hspace{27pt}(f)}\\ \text{Less withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . }&\underline{\hspace{28pt}\text{(g)}}\\ \text{Increase in owner’s equity . . . . . . . . . . . . . . . . . . }&&\underline{\hspace{35pt}\text{(h)}}\\ \text{LuAnn Martin, capital, May 31, 2014 . . . . . . . . .}&&\underline{\underline{\$\hspace{32pt}\text{(i)}}}\\ \end{array}$$

$$\begin{array}{c} \textbf{Atlas Realty}\\ \textbf{Balance Sheet}\\ \textbf{May 31, 2014} \end{array}$$

$$\begin{array}{llr} {\textbf{\hspace{108pt}Assets}}\\ \text{Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&&\$\text{\hspace{10pt}{123,200}}\\ \text{Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . }&&\text{12,800}\\ \text{Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&&\text{\underline{\hspace{37pt}{(j)}}}\\ \text{Total assets . . . . . . . . . . . . . . . . . . . . . . . . }&&\underline{\underline{\$\hspace{27pt}\text{(k)}\hspace{2pt}}}\\ \\ {\textbf{\hspace{98pt}Liabilities}}\\ \text{Accounts payable . . . . . . . . . . . . . . . . . . . }&&\$\hspace{15pt}\text{48,000}\\ {\textbf{\hspace{84pt}Owner's Equity}}\\ \text{LuAnn Martin, capital . . . . . . . . . . . . . . . }&&\underline{\text{\hspace{37pt}(l)}}\\ \text{Total liabilities and owner's equity . . . . . }&&\underline{\underline{\$\hspace{24pt}\text{(m)}\hspace{2pt}}}\\ \end{array}$$

$$\begin{array}{c} \textbf{Atlas Realty}\\ \textbf{Statement of Cash Flows}\\ \textbf{For the Month Ended May 31, 2014} \end{array}$$

$$\begin{array}{lrr} \text{Cash flows from operating activities:}\\ \hspace{10pt}\text{Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&\$\hspace{35pt}\text{(n)}\\ \hspace{10pt}\text{Deduct cash payments for expenses and payments to creditors . . . . . }&\underline{\hspace{14pt}\text{(252,800)}}\\ \hspace{10pt}\text{Net cash flows from operating activities}&&\$\hspace{25pt}\text{(o)}\\ \text{Cash flows from investing activities:}\\ \hspace{10pt}\text{Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . .}&&\text{(120,000)}\\ \text{Cash flows from financing activities:}\\ \hspace{10pt}\text{Cash received as owner’s investment . . . . . . . . . . . . . . . . . . . . . . . . . .}&\$\hspace{15pt}\text{160,000}\\ \hspace{10pt}\text{Deduct cash withdrawal by owner . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&\underline{\hspace{18pt}\text{(64,000)}}\\ \hspace{10pt}\text{Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . .}&&\underline{\hspace{30pt}\text{(p)}}\\ \text{Net increase (decrease) in cash and May 31, 2014, cash balance . . . . . . . }&&\underline{\underline{\$\hspace{25pt}\text{(q)}}}\\ \end{array}$$

By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (q).

What led to the establishment of black colleges in the South during Reconstruction?