Condensed comparative income statements of Señorina Panchos, a Mexican restauran

ID: 2421307 • Letter: C

Question

Condensed comparative income statements of Señorina Panchos, a Mexican restaurant chain, for the years 2009 through 2011 are presented in Exhibit 9-18 (000,000’s pesos). You are interested in gauging the past trend in dividends paid by Señorina Panchos from a dollar perspective. The company’s payout ratio (ratio of dividends paid to reported earnings) has averaged 30 percent. Foreign exchange rates during the three-year period are found in Exhibit 9-19. Required: Prepare a trend analysis of dividends paid by Señorina Panchos from a U.S. perspective assuming (a) there are no restrictions on the payment of dividends to U.S. investors and (b) Señorina Panchos’ accounting practices are similar to those in the United States.

EXHIBIT 9-18 Comparative Income Statements: Señorina Panchos Sales Gross margin Net income 2009 91,600 15,500 8,500 2010 114,300 20,500 10,800 2011 138,900 27,700 15,900 Foreign Exchange Rates 2009 $1=P12.112 EXHIBIT 9-19 2010 2011 Year-end rates $1=P12.640 $1=P13.000

Explanation / Answer

Trend analysis of dividends paid by Señorina Panchos

2009

2010

2011

Net Income

8500

10800

15900

Dividend

2550

3240

4770

Exchange rates ($1 =)

P 12.112

P 12.640

P 13.000

Dividend from a U.S. perspective

$210.535

$ 256.3291

$ 366.9231

DIVIDEND yield

21.75

43.15

Dividend increase each year (form 2009 to 2011)

dividend yield in terms of $ will increase from 21.75 to 43.15 in 2011