Harte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclic downturn in the home furnishings business. The company has maintained a constant dividend payout of $2.00 tied to a target payout ratio of 30%. Management is preparing a share repurchase recommendation to present to the firm's board of directors. The following data have been gathered from the last two years: LOADING... 2021 2022 Earnings available for common stockholders $1,995,000 $1,900,000 Number of shares outstanding 356,250 356,250 Earnings per share $5.60 $5.33 Market price per share $29.12 $24.52 Price/earnings ratio 5.2 4.6 a) How many shares should the company have outstanding in 2022 if its earnings available for common stockholders in that year are $1,900,000 and it pays a dividend of $2.00, given that its desired payout ratio is 30%? b) How many shares would Harte have to repurchase to have the level of shares outstanding calculated in part a?
Harte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclic downturn in the home furnishings business. The company has maintained a constant dividend payout of $2.00 tied to a target payout ratio of 30%. Management is preparing a share repurchase recommendation to present to the firm's board of directors. The following data have been gathered from the last two years: LOADING... 2021 2022 Earnings available for common stockholders $1,995,000 $1,900,000 Number of shares outstanding 356,250 356,250 Earnings per share $5.60 $5.33 Market price per share $29.12 $24.52 Price/earnings ratio 5.2 4.6 a) How many shares should the company have outstanding in 2022 if its earnings available for common stockholders in that year are $1,900,000 and it pays a dividend of $2.00, given that its desired payout ratio is 30%? b) How many shares would Harte have to repurchase to have the level of shares outstanding calculated in part a?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Concept explainers
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Question
Harte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclic downturn in the home furnishings business. The company has maintained a constant dividend payout of $2.00 tied to a target payout ratio of 30%. Management is preparing a share repurchase recommendation to present to the firm's board of directors. The following data have been gathered from the last two years:
LOADING...
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2021
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2022
|
|
Earnings available for common stockholders
|
$1,995,000
|
|
$1,900,000
|
|
Number of shares outstanding
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356,250
|
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356,250
|
|
Earnings per share
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$5.60
|
|
$5.33
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|
Market price per share
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$29.12
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$24.52
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|
Price/earnings ratio
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5.2
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4.6
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a) How many shares should the company have outstanding in 2022 if its earnings available for common stockholders in that year are $1,900,000 and it pays a dividend of $2.00, given that its desired payout ratio is 30%?
b) How many shares would Harte have to repurchase to have the level of shares outstanding calculated in part a?
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