Widgets world earned 187500 this years the company strictly

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1. Free flying aviation declared a 20 percent stock dividend that will be paid three weeks from today. Before the "payment" of stock dividend, the equity section of FFA's balance sheet showed the following

Common stock (10,000 shares outstanding, $5 per value)   $50,000

Additional paid-in capital                                                        20,000

Retained earnings                                                                  30,000

Total common shareholders' equity                                       100,000

The market value of FFA's stock is $7.00 per share. Construct a pro forma balance sheet showing the effect of the stock dividend.

2. Widgets world earned $187,500 this years. The company strictly follows the residual dividend policy when paying dividends. WW had determined that it needs a total of $250,000 for investment in capital budgeting projects this year. If the company's debt-to asset ratio is 55 percent, what will its dividend payout ratio be this year.

Reference no: EM13619002

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