Dividend constraints The Howe Company's stockholders' equity account follows:

$$\begin{array}{lr}\text { Common stock (400,000 shares at } \$ 4 \text { par) } & \$ 1,600,000 \\ \text { Paid-in capital in excess of par } & 1,000,000 \\ \text { Retained earnings } & \dfrac{1,900,000}\\ \\ \text { Total stockholders' equity } &{\$ 4,500,000} \\ \end{array}$$

The earnings available for common stockholders from this period's operations are $100,000, which have been included as part of the$1.9 million retained earnings.

b. If the firm has $160,000 in cash, what is the largest per-share dividend it can pay without borrowing?

Chicago Paints Corporation has a target capital structure of 40 percent debt and 60 percent common equity. The company expects to have $\$ 600$ of after-tax income during the coming year, and it plans to retain 30 percent of its earnings. The current stock price is $\mathrm{P}_0=\$ 30$, the last dividend paid was $\mathrm{D}_0=\$ 2.00$, and the dividend is expected to grow at a constant rate of 7 percent. New stock can be sold at a flotation cost of $\mathrm{F}=25 \%$. What will Chicago Paints' marginal cost of equity capital be if it raises a total of $\$ 500$ of new capital?

The following financial statement data is from five separate companies.

Required
1. Answer the following questions about Company V:
 a. What is the amount of equity on December 31, 2010?
 b. What is the amount of equity on December 31, 2011?
 c. What is the net income or loss for the year 2011?
2. Answer the following questions about Company W:
 a. What is the amount of equity on December 31, 2010?
 b. What is the amount of equity on December 31, 2011?
 c. What is the amount of liabilities on December 31, 2011?
3. Calculate the amount of owner investments for Company X during 2011.
4. Calculate the amount of assets for Company Y on December 31, 2011.
5. Calculate the amount of liabilities for Company Z on December 31, 2010.

______ is the total combined customer lifetime values of all the company's current and potential customers.

a. Customer-perceived value
b. Value proposition
c. Market share
d. Share of customer
e. Customer equity

The following financial statement information is from five separate companies.

Required
1. Answer the following questions about Company V.
 a. What is the amount of equity on December 31, 2009?
 b. What is the amount of equity on December 31, 2010?
 c. What is the net income or loss on December 31, 2010?
2. Answer the following questions about Company W.
 a. What is the amount of equity on December 31, 2009?
 b. What is the amount of equity on December 31, 2010?
 c. What is the amount of liabilities for year 2010?
3. Compute the amount of owner investments for Company X during year 2010.
4. Compute the amount of liabilities for Company Y on December 31, 2009.
5. Compute the amount of assets for Company C on December 31, 2010.

The following data show four items from the financial statements of two companies for a recent year (amounts in millions of US$):$

$$\begin{array}{lrr} \hline &\textbf{Company}&\textbf{Company}\\ \hline \textbf{For Year}\\ \text{Revenues}&\$38,334&\$93,469\\ \text{Net Income}&6,986&6,999\\ \textbf{Average During Year}\\ \text{Total Assets}&52,010&187,882\\ \text{Shareholders’ Equity}&39,757&49,558\\ \hline \end{array}$$

$ b. Compute the rate of return on equity for each company and disaggregate ROE into profit margin, total assets turnover, and capital structure leverage components.

The Ellis Corporation has heavy lease commitments. Prior to SFAS No. 13, it merely footnoted lease obligations in the balance sheet, which appeared as follows. The footnotes stated that the company had $\$14$ million in annual capital lease obligations for the next 20 years. Construct a revised balance sheet that includes lease obligations, as in the Table.

Recent balance sheet information for two companies in the food industry, H.J. Heinz Company and The Hershey Company, are as follows (in thousands of dollars):

$$\begin{array}{lrr} & \textbf{H.J. Heinz} & \textbf{Hershey}\\ \hline \text { Net property, plant, and equipment } & \$ 1,998,153 & \$ 1,651,300 \\ \text { Current liabilities } & 2,505,106 & 1,453,538 \\ \text { Long-term debt } & 4,413,641 & 1,248,128 \\ \text { Other long-term liabilities } & 1,272,596 & 486,473 \\ \text { Stockholders' equity } & 1,841,683 & 683,423 \end{array}$$

Determine the ratio of liabilities to stockholders’ equity for both companies. Round to one decimal place.

A number of business transactions carried out by Smalling Manufacturing Company are as follows:
b. Sold land for cash at a price equal to its cost.
Indicate the effects of each of these transactions on the total amounts of the company's assets, liabilities, and owners' equity. Organize your answer in tabular form, using the following column headings and the code letters I for increase, D for decrease, and NE for no effect. The answer for transaction $\mathbf{a}$ is provided as an example:

$$\begin{array}{cccc} \text { Transaction } & \text { Assets } & =\text { Liabilities }+\text { Owners' Equity } \\ \hline \text { (a) } & \text { I } & \text { I } \end{array}$$

When a person borrows money to buy a house, the secured loan the bank issues is a mortgage. The house serves as the security the bank needs to justify the risk of loaning money. If a homeowner takes out another loan on the same house, the secured loan is a second mortgage. Some homeowners use their homes as collateral to get a home equity loan. In 2006, there were $51,234,170$ houses used as collateral for mortgages or home equity.

How many loans do the data in the pie chart represent?

In early $2012$, General Electric (GE) had a book value of equity of $\$ 109$ billion, $10.3$ billion shares outstanding, and a market price of $\$ 9.66$ per share. GE also had cash of $\$ 40$ billion, and total debt of $\$ 530$ billion. Three years later, in early $2015$, GE had a book value of equity of $\$ 112$ billion, $10.9$ billion shares outstanding with a market price of $\$ 16.59$ per share, cash of $\$ 85$ billion, and total debt of $\$ 417$ billion. Over this period, what was the change in GE's

a. market capitalization?

b. market-to-book ratio?

c. enterprise value?

Integrative: Optimal capital structure The board of directors of Morales Publishing, Inc., has commissioned a capital structure study. The company has total assets of $40,000,000. It has earnings before interest and taxes of$ 8,000,000 and is taxed at a rate of 40%. a. Create a spreadsheet like the one in Table 12.10 showing values of debt and equity as well as the total number of shares, assuming a book value of $25 per share.

On October 1, Little Bobby Corporation’s stockholders’ equity is as follows.

$$\begin{array}{lc} \text{Common stock, \$5 par value}&\$400,000\\ \text{Paid-in capital in excess of par- common stock}&25,000\\ \text{Retained earnings}&\underline{155,000}\\ \text{Total stockholders' equity}&\underline{\underline{\$580,000}} \end{array}$$

On October 1, Little Bobby declares and distributes a 10% stock dividend when the market price of the stock is $15 per share.

Instructions (a) Compute the par value per share (1) before the stock dividend and (2) after the stock dividend.

Dividend constraints The Howe Company's stockholders' equity account follows:

$$\begin{array}{lr}\text { Common stock (400,000 shares at } \$ 4 \text { par) } & \$ 1,600,000 \\ \text { Paid-in capital in excess of par } & 1,000,000 \\ \text { Retained earnings } & \dfrac{1,900,000}\\ \\ \text { Total stockholders' equity } &{\$ 4,500,000} \\ \end{array}$$

The earnings available for common stockholders from this period's operations are $100,000, which have been included as part of the$1.9 million retained earnings. a. What is the maximum dividend per share that the firm can pay? (Assume that legal capital includes all paid-in capital.)