1) Sperle Corporation has provided the following data concerning its stockholder
ID: 2497455 • Letter: 1
Question
1) Sperle Corporation has provided the following data concerning its stockholders' equity accounts:
Year 1 Year 2
Stockholders Equity:
Common stock, $5 par value $400,000 $400,000
Additional paid-in capital, common stock 60,000 60,000
Retained earnings 654,000 630,000
Total stockholders equity $1,114,000 $1,090,000
Net income for Year 2 was $30,400. Dividends on common stock during Year 2 totaled $6,400. The market price of common stock at the end of Year 2 was $3.08 per share.
The company's dividend yield ratio for Year 2 is closest to:
21.1 %
2.6 %
1.6 %
3) (Ignore income taxes in this problem.) The management of Keno Corporation is considering three investment projects-B, C, and D. Project B would require an investment of $15,000, Project C of $50,000, and Project D of $89,000. The present value of the cash inflows would be $16,350 for Project B, $56,500 for Project C, and $96,120 for Project D.
Rank the projects according to the profitability index, from most profitable to least profitable.
4) Ribaudo Corporation has provided the following financial data from its balance sheet and income statement:
5.29
0.19
1.04
0.96
5.29
0.19
1.04
0.96
Explanation / Answer
1. Dividend Yield Ratio = Dividend / Net Income x 100
= 6400 / 30400 x 100
= 21.1%
3. Profitability Index = Present Value of Cash inlfows / Present Value of Cash outflows
Project B = 16350 / 15000 = 1.09
Project C = 56500 / 50000 = 1.13
Project D = 96120 / 89000 = 1.08
Most Profitable to least profitable:
i. Project C
ii. Project B
iii. Project D
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