QUESTION 4 Not complete Points out of 2.00 F Flag question Return on Common Stoc

Question

QUESTION 4 Not complete Points out of 2.00 F Flag question Return on Common Stockholders' Equity, Dividend Yield, and Dividend Payout The following Information relates to Waterloo Components, Inc: 2015 2016 Net income Preferred stock dividends Average common stockholders' equity 2,000,000 2,100,000 Dividend per common share Earnings per share Market price per common share, year-end 27.50 30.00 $65,000 $80,000 5,000 5,000 1.40 1.50 2.90 2.95 a. Calculate the company's return on common stockholders' equity for 2015 and 2016. b. Calculate the company's dividend yield for 2015 and 2016. c. Calculate the company's dividend payout for 2015 and 2016. Round answers to one decimal point. 2015 2016 a. Return on Common Stockholder Equity b. Dividend Yield

Explanation / Answer

For 2015

Return on common stockholders equity = (Net income - Preferred dividend)/Average common stockholders equity

= (65,000 - 5,000)/2,000,000

= 60,000/2,000,000

= 3%

Dividend yield = Dividend per share/Market price per common share

= 1.40/27.50

= 5.09%

Dividend payout = Dividend per share/Earnings per share

= 1.40/2.90

= 48.28%

For 2016

Return on common stockholders equity = (Net income - Preferred dividend)/Average common stockholders equity

= (80,000 - 5,000)/2,100,000

= 75,000/2,100,000

= 3.57%

Dividend yield = Dividend per share/Market price per common share

= 1.50/30

= 5%

Dividend payout = Dividend per share/Earnings per share

= 1.50/2.95

= 50.85%

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