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18)The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently

selling for $5 per share.

   
  Common stock (50,000 shares at $1 par)$50,000  
  Capital in excess of par 50,000  
  Retained earnings 100,000  
 
  Total equity$200,000  
 
The firm intends to first declare a 10 percent stock dividend and then pay a 20-cent cash dividend (which also causes a reduction of retained earnings).
Show the capital section of the balance sheet after the first transaction and then after the second transaction. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
Western Pipe Co.
  After Stock Dividend
  Common stock$  
  Capital in excess of par 
  Retained earnings 
 
  Total equity$  
 
Western Pipe Co.
After Cash Dividend
  Common stock $  
  Capital in excess of par 
  Retained earnings 
 
  Total equity
 
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16)The stock of Pills Berry Company is currently selling at $90 per share. The firm pays a dividend of

$2.75 per share.

a.What is the annual dividend yield? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Dividend yield%  
b.If the firm has a payout rate of 40 percent, what is the firm’s P/E ratio? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  P/E ratio times 
 
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balance sheet

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14) Squash Delight Inc. has the following balance sheet:    Assets  Cash$35,000    Accounts receivable 290,000    Fixed assets 721,000        Total assets$1,046,000   Liabilities  Accounts payable$334,000    Notes payable 57,000    Common stock (140,000 shares @ $2 par) 280,000    Capital in excess of par 100,000    Retained earnings 275,000        Total liabilities & owners’ equity$1,046,000    The firm’s stock sells for $10 a share.
 a.Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
      Common stock$    Capital excess of par$    Retained earnings$      Total equity$     
 b.Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)  
      Common stock$    Capital excess of par$    Retained earnings$      Total equity$       
 c.Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?   Stock splitStock dividend

 
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dividend

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13)A financial analyst is attempting to assess the future dividend policy of Environmental Systems by

examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 20 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 39 percent, and eventually reach 54 percent during the maturity stage (IV).

a.Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations and round your answers to 2 decimal places.)
  
  Stage I$.50  
  Stage II 2.10  
  Stage III 2.90  
  Stage IV 3.30  
         Dividends
  Stage I$  
  Stage II$  
  Stage III$  
  Stage IV$  
b.Assume in Stage IV that an investor owns 280 shares and is in a 15 percent tax bracket. What will be the investor’s aftertax income from the cash dividend? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  Aftertax income$  
c.In what two stages is the firm most likely to utilize stock dividends or stock splits? (Select two answers. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
  
 Stage IStage IIStage IIIStage IV
 
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