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Chapter 5: Q4BP (page 596)

Polycom Systems earned \(553 million last year and paid out 25 percent of earnings in dividends.

a. By how much did the company鈥檚 retained earnings increase?

b. With 100 million shares outstanding and a stock price of \)101, what was the dividend yield? (Hint: First compute dividends per share.)

Short Answer

Expert verified

The retained earnings are $414,750,000.The dividend yield is 1.37%.

Step by step solution

01

Information provided in the question

Earnings = $553,000,000

Pay-out ratio = 25%

Shares outstanding = 100,000,000

Stock price = $101

02

Calculation of retained earnings

The retained earnings are $414,750,000.

Dividend=Earnings脳Pay - out ratio=$553,000,000脳25%=$138,250,000

Retained earnings=Earnings-Dividend=$553,000,000-$138,250,000=$414,750,000

03

Calculation of dividend yield

The dividend yield is 1.37%.

Dividend per share=DividendShares outstanding=$138,250,000100,000,000=$1.38

Dividend yield=Dividend per shareStock price=$1.38$101=1.37%

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Question: The Bailey Corporation, a manufacturer of medical supplies and equipment, is planning to sell its shares to the general public for the first time. The firm鈥檚 investment banker, Robert Merrill and Company, is working with Bailey Corporation in determining a number of items. Information on the Bailey Corporation follows:

Bailey corporation

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\(42,680,000

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Marketable securities

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Accounts receivables

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Inventory

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Total current assets

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Net plant and equipment

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Total assets

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Liabilities and stockholders鈥� equity

Current liabilities:

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Notes payable

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Total liabilities and stockholder鈥檚 equity

\(28,650,000

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