Part III. The following summary of the payout, dividend yield, and basic earnings per share ratios is available for a three-year period for Acadian Timber Corp.: 2021 Payout ratio 103.6% Dividend yield 6.1% Basic earnings per share $1.12 2020 87.7% 7.2% $1.32 2019 111.7% 7.0% $1.04 Instructions a. Using the information provided above, determine the dividends declared and paid per common share in each year (assume there were no preferred share dividends). (Hint: You can determine dividends per share by using basic earnings per share and the payout ratio.) b. Do you think most companies would reduce dividends declared on common shares when basic earnings per share declines? Why or why not? c. Derive the company's market share price at the end of each of the three years shown above by using the common dividends per share calculated in part (a) above and the dividend yield provided. Why do you think that the company's dividend yield decreased in 2021? d. If you were an investor looking for dividend income, would you be happy with Acadian's dividend policy? Explain.
Part III. The following summary of the payout, dividend yield, and basic earnings per share ratios is available for a three-year period for Acadian Timber Corp.: 2021 Payout ratio 103.6% Dividend yield 6.1% Basic earnings per share $1.12 2020 87.7% 7.2% $1.32 2019 111.7% 7.0% $1.04 Instructions a. Using the information provided above, determine the dividends declared and paid per common share in each year (assume there were no preferred share dividends). (Hint: You can determine dividends per share by using basic earnings per share and the payout ratio.) b. Do you think most companies would reduce dividends declared on common shares when basic earnings per share declines? Why or why not? c. Derive the company's market share price at the end of each of the three years shown above by using the common dividends per share calculated in part (a) above and the dividend yield provided. Why do you think that the company's dividend yield decreased in 2021? d. If you were an investor looking for dividend income, would you be happy with Acadian's dividend policy? Explain.
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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Part III. The following summary of the payout, dividend yield, and basic earnings per share ratios is available for a three-year period for Acadian Timber Corp.:
Instructions
a. Using the information provided above, determine the dividends declared and paid per common share in each year (assume there were no
b. Do you think most companies would reduce dividends declared on common shares when basic earnings per share declines? Why or why not?
c. Derive the company’s market share price at the end of each of the three years shown above by using the common dividends per share calculated in part (a) above and the dividend yield provided. Why do you think that the company’s dividend yield decreased in 2021?
d. If you were an investor looking for dividend income, would you be happy with Acadian’s dividend policy? Explain.
Transcribed Image Text:Part III. The following summary of the payout, dividend yield, and basic earnings per share ratios is
available for a three-year period for Acadian Timber Corp.:
2021
103.6%
6.1%
Payout ratio
Dividend yield
Basic earnings per share $1.12
2020
87.7%
7.2%
$1.32
2019
111.7%
7.0%
$1.04
Instructions
a. Using the information provided above, determine the dividends declared and paid per common
share in each year (assume there were no preferred share dividends). (Hint: You can determine
dividends per share by using basic earnings per share and the payout ratio.)
b.
Do you think most companies would reduce dividends declared on common shares when basic
earnings per share declines? Why or why not?
c.
Derive the company's market share price at the end of each of the three years shown above by
using the common dividends per share calculated in part (a) above and the dividend yield
provided. Why do you think that the company's dividend yield decreased in 2021?
d. If you were an investor looking for dividend income, would you be happy with Acadian's
dividend policy? Explain.
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