Calculate the dividend yield

Assignment Help Financial Management
Reference no: EM131985516

Smith Motors Inc. manufactures, distributes, and services automotive parts and engines worldwide. Smith's income statement for the year just ending is shown below.

Assume that today is the first day of Year 2 and that Smith's common shares are trading at a price of $88. In its most recent Management Discussion and Analysis (MD&A) Smith's management forecast earnings-per-share of $7.5 for Year 2.

If Smith maintains its Year 1 payout ratio, then what is the dividend yield (based on forecasted earnings)?

SMITH MOTORS INC.

INCOME STATEMENT

YEAR 1 ($000,000's)

Revenue $20,995
COGS 15,624
SG&A 2,466
Dep. Exp. 247
EBIT 2,658
Int. Exp. 55
Pre-Tax Income 2,603
Income Tax 898
Net Income 1,705


Shares Outstanding (millions) 205
Total Common Dividends $300.5

Reference no: EM131985516

Questions Cloud

Changes in economic conditions : How would you shift the aggregative supply curve to represent each of the following changes in economic conditions?
What advice will you give him : Your friend has tried to get a traditional loan but can't because he has a low asset base and is considered a high risk.
Changes in economic conditions : How would you shift the aggregative demand curve to represent each of the following changes in economic conditions?
Both forms of payment are equivalent : What annual payments should be made so that both forms of payment are equivalent?
Calculate the dividend yield : Smith Motors Inc. manufactures, distributes, and services automotive parts and engines worldwide.
Evaluate brand management implications to the organisation : MKTG60421 - Brand Management - Discuss the challenges and importance of brand management and critically evaluate its implications to the organisation
Value of future cash flows : A firm recently paid a $0.70 annual dividend. If the required return for this stock is 13.5 percent, what is its current value?
Find the value of the divisor : Divisor Definition Problem - Find the value of the divisor 135 ÷ m = 27. Find the value of the divisor, here 207 ÷ m = 3
Explanation for a downward-sloping demand curve : How is your explanation different from the explanation for a downward-sloping demand curve for an individual product?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the firms optimal capital budget

What is the firm's optimal capital budget when differential risk is considered and what is the firms optimal capital budget?b. Now, suppose Medtronics managers want to consider differential risk in the capital budgeting process.

  Discount rate is important component in net present value

The social discount rate is an important component in net present value (NPV) calculations for public policies related to stock externalities, but economists do not agree on which value to use for this rate. Suppose a recent study reports that the NP..

  What are the initial cash flows and operating cash flows

Pantaloon Beer is considering opening a microbrewery near campus. What are the Initial Cash Flows in Year 0? What are the Operating Cash Flows in Year 2?

  Explain the role of government in international trade the

explain the role of government in international trade the various levels of economic integration and the impact on

  Decided to lower the personal income tax rates

If US Congress decided to LOWER the personal income tax rates would you expect: dividend yields of US companies increase or decrease? Why do some companies utilize lower D/V ratio than that predicted by the optimal trade-off between tax benefits of d..

  What are the convexity and duration of the bond

What are the convexity and duration of the bond? What price would be predicted by the duration equation?

  What is the price-earnings ratio

Jupiter Explorers has $9,600 in sales. The profit margin is 4 percent. There are 6,400 shares of stock outstanding. The market price per share is $1.70. What is the price-earnings ratio?

  What is expected return on portfolio

Suppose you buy a stock for $30.2, receive a dividend of $1.3, and sell it for $48.28. What is your total rate of return? Suppose you buy a stock for $33.19, receive a dividend of $2.7, and sell it for $32.04. What is your dividend yield? What is the..

  How do investors view degree of firm financial leverage

How do investors view the degree of a firm's financial leverage?

  Management contract with its newly hired president

The Great Giant Corp. has a management contract with its newly hired president. The contract requires a lump sum payment of $25,300,000 be paid to the president upon the completion of her first 6 years of service.

  How much will you have for down payment at the end of year

Your expected annual return during the saving period is 6%. How much will you have for a down payment at the end of year 3?

  Superannuation accounts at retirement

what are the accumulated values of their superannuation accounts at retirement?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd