B.At what unit sales level would Wingler have the same EPS if the new production process is implemented? What is the EPS at this level?
44 CHAPTER THIRTEEN PROBLEMS 1.Craven Corp. has retained earnings of $1.75 million and 100,000 shares of stock outstanding with a market value of $25 per share. If Craven declares a 15 percent stock dividend, what will Craven's retained earnings be after the dividend? 2A company has a net income of $100 million and a policy of paying out 60 percent of its earnings in dividends. How much total financing can be accomplished before the company has to sell common stock? Assume a debt/equity ratio of 66.6 percent. 3.Alton Corp. has earnings of $1.5 million and a policy of paying out 60 percent of earnings. Alton has $1.8 million in acceptable investments but is unable to issue new equity. Assuming a D/E of 0.4, how much will Alton be able to spend on capital budgeting if it wishes to stick with the 60 percent payout? 4.Before a 2-for-1 stock split, Dean Company sold for $60 a share, earning $15 and paying $8 dividend per share. After the split, the dividend per share becomes $5.20. By what percentage has the payout ratio risen? 5.Butler Corporation has declared a 10 percent stock dividend. Butler has 2 million shares outstanding with a current market price of $7. Its capital stock account is $1 million, and the firm's retained earnings are $8 million. What balances will the retained earnings and capital stock accounts show after the distribution of the stock dividend? 6.The Sherman Steel Company has an order backlog of $5 million. It desires to expand production capacity by 20 percent, which will involve a $15 million investment in plant and equipment. Management desires to maintain 40 percent debt in its capital structure. The dividend policy has been to distribute 25 percent of their after-tax earnings, which this year were $6 million. If management wishes to maintain its dividend policy, how much external equity must the firm seek at the beginning of the year? 7.On March 15, the directors of Glut Oil Company met and declared the regular dividend of 48 cents a share to holders of record on March 31, payment to made on May 15. Of the 100 shares of Glut Oil you now own, 25 shares at a time were purchased on each of the following dates: January 1, February 15, March 15, and April 1. What total dividends will you receive? (Assume ex-dividend four days prior to record date.)
You've reached the end of your free preview.
Want to read all 46 pages?