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Financial Solutions and Ratios Analysis

This document contains 12 problems that provide financial information for various companies and ask the reader to calculate metrics like payout ratio, dividends per share, dividend yield, earnings per share, and P/E ratio. The problems provide data on market share price, earnings, dividends, number of shares, and ask the reader to determine missing values using the provided formulas and relationships between metrics.

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Tobi Omole
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21 views6 pages

Financial Solutions and Ratios Analysis

This document contains 12 problems that provide financial information for various companies and ask the reader to calculate metrics like payout ratio, dividends per share, dividend yield, earnings per share, and P/E ratio. The problems provide data on market share price, earnings, dividends, number of shares, and ask the reader to determine missing values using the provided formulas and relationships between metrics.

Uploaded by

Tobi Omole
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Solutions – Chapter 18

18-1 Omni Telecom

D1 $1.80 $1.80
a. P0     $30.00
K e  g 0.10  0.04 .06

D1 $1.50 $1.50
b. P0     $37.50
K e  g 0.10  0.06 .04

c. Plan B produces the higher value because of the higher growth rate.

18-4 Gallagher Parades

Dividend per share $0.75


Payout ratio    0.250  25.0%
Earnings per share $3.00

18-5 Sewell Enterprises

Dividends = (earnings – retained funds)

= $160 million – $100 million

= $60 million

Dividends $60 million


Payout ratio    0.375  37.5%
Earnings $160 million
18-6 [Link]

Dividends ?
Payout ratio    0.35  35.0%
Earnings $420 million
Dividends  Earnings  payout ratio  $420 million  0.35
 $147 million

Addition to retained earnings = earnings – dividends

= $420 million – $147 million

= $273 million

18-7 Ronstadt Drum Company

a.
Dividends ?
Payout ratio    0.25  25.0%
Earnings $710 million
Dividends  Earnings  payout ratio  $710 million  0.25
 $177.5 million

Addition to retained earnings = earnings – dividends

= $710 million – $177.5 million

= $532.5 million

b.
Dividends $177.5 million
Dividend per share    $2.09
# of shares 85 million
Dividend per share $2.09
Dividend yield    0.0523  5.23%
Market share price $40

18-8 Springsteen Music Company

a.
Dividends ?
Payout ratio    0.20  20.0%
Earnings $820 million
Dividends  Earnings payout ratio  $820 million  0.20
 $164 million

Addition to retained earnings = earnings – dividends

= $820 million – $164 million

= $656 million

b.
Dividends $164 million
Dividend per share    $1.64
# of shares 100 million

Dividend per share $1.64


Dividend yield    0.0328  3.28%
Market share price $50
18-9Pills Berry Corporation

Dividend per share $1.80


Dividend yield    0.03  3%
a. Market share price $60

b.
Dividends per share $1.80
Payout ratio    0.50  50.0%
Earnings per share ?
Dividends per share $1.80
Earnings per share    $3.60
Payout ratio 0.50

Market share price $60


P/E ratio    16.67
Earnings per share $3.60

18-10 Raptor BB Ranch

Dividend per share $1.25


Dividend yield    0.05  5%
a. Market share price $25

b.
Dividends per share $1.25
Payout ratio    0.50  50.0%
Earnings per share ?
Dividends per share $1.25
Earnings per share    $2.50
Payout ratio 0.50
Market share price $25
P/E ratio    10.0
Earnings per share $2.50

18-11 Ynot Development Company

Market share price $22.50


P/E ratio = = = 15.0
Earnings per share ?
Market share price $22.50
Earnings per share = = = $1.50
P/E ratio 15

Dividends per share ?


Payout ratio = = = 0.20 = 20%
Earnings per share $1.50
Dividends per share = Earnings per share × Payout ratio
= $1.50 × 0.22 = $0.30

Dividend per share $0.30


Dividend yield = = = 0.013 = 1.3%
Market share price $22.50

18-12 Chrétien Golf Links Limited

Market share price $50


P/E ratio    20.0
Earnings per share ?
Market share price $50
Earnings per share    $2.50
P/E ratio 20

Dividends per share ?


Payout ratio    0.30  30.0%
Earnings per share $2.50
Dividends per share  Earnings per share  Payout ratio
 $2.50  0.30  $0.75
Dividend per share $0.75
Dividend yield    0.0150  1.50%
Market share price $50

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