Question

Santiago Systems Income Statement For the Year Ended December 31, 20X2 Amount Percent Net sales $5,345,000 100.0% Less: Cost of goods sold (3,474,250) 65.0 Gross margin $1,870,750 35.0 Less: Operating expenses (1,140,300) 21.3 Operating income $730,450 13.7 Less: Interest expense (27,000) 0.5 Income before taxes $703,450 13.2 Less: Income taxes (40%)* (281,380) 5.3 Net income $422,070 7.9 * Includes both state and federal taxes. Santiago Systems Statement of Retained Earnings For the Year Ended December 31, 20X2 Balance, beginning of period $1,205,500 Net income 422,070 Total $1,627,570 Preferred dividends (40,000) Dividends to common stockholders (150,000) Balance, end of period $1,437,570 Santiago Systems Comparative Balance Sheets At December 31, 20X1 and 20X2 20X1 20X2 Assets Current assets: Cash $1,900,000 $2,100,000 Marketable securities 350,000 400,000 Accounts receivable (net) 625,000 675,000 Inventories 230,000 240,000 Other 50,000 50,000 Total current assets $3,155,000 $3,465,000 Property and equipment: Land $900,000 $900,000 Building and equipment (net) 1,240,800 1,192,800 Total long-term assets $2,140,800 $2,092,800 Total assets $5,295,800 $5,557,800 Liabilities and Stockholders' Equity Current liabilities: Notes payable, short term $247,300 $256,230 Accounts payable 240,000 250,000 Current maturity of long-term debt 3,000 4,000 Accrued payables 150,000 160,000 Total current liabilities $640,300 $670,230 Long-term liabilities: Bonds payable, 9% 300,000 300,000 Total liabilities $940,300 $970,230 Stockholders' equity: Preferred stock, $25 par, 8% $500,000 $500,000 Common stock, $1.00 par 150,000 150,000 Additional paid-in capital* 2,500,000 2,500,000 Retained earnings 1,205,500 1,437,570 Total stockholders' equity $4,355,500 $4,587,570 Total liabilities and stockholders' equity $5,295,800 $5,557,800 * For common stock only. Also, assume that the market price per common share is $20. Required:____________.
1. Compute the dividends per share. $
2. Compute the dividend yield. %
3. Compute the dividend payout ratio. Round your answer to two decimal places. %

Answer 1

Answer:

1)Dividend per share = 1

2)Dividend yield = 5%

3)Dividend payout ratio = 0.39

Explanation:

As per the data given in the question,

Net sale = $5,345,000

Cost of goods sold = $3,474,250

Gross margin = $5,345,000 - $3,474,250 = $1,870,750

Operating expenses = $1,140,300

Operating income = $1,870,750 - $1,140,300 = $730,450

Interest expenses = $27,000

Income before taxes = $730,450 - $27,000 = $703,450

Income tax(40%) = $281,380

Net in come = $422,070

Preference of dividend = $40,000

Earnings available to common stockholders = $422,070 - $40,000 =$382,070

Common stock = $150,000

Earning per share = $382,070÷$150,000 = 2.55

Dividend to common stockholders = $150,000

Dividend per share = $150,000÷$150,000 = 1

Market price of common share = $20

Dividend yield = (Dividend per share×100÷market price of common share) = 5%

Dividend payout ratio = Dividend per share÷earning per share =1÷2.55 = 0.39