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Chapter 13 CFIN5
Chapter 13 Solutions
13-1 Capital budget = $50,000,000
13-2 Capital budget = $120,000
13-3 Capital budget = $20,000,000
Debt/assets ratio = 30%
Net income = $12,000,000
13-4 a. Dividends2015 = $9,000,000(1.05) = $9,450,000
b. Net income = $14,400,000
13-5 Dividend = 500,000 x $2.25 = $1,125,000
© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 13 CFIN5
13-6 DPS1 = $3.50(1.06) = $3.71
13-7 DPS0 = $2.50 = pre-split dividend
Alternative solution:
13-8 Retained earnings last year = $100,000
Net income last year = $250,000
13-9 Dividends paid last year = $600,000
13-10 Dividend payout ratio = 30%
Dividends = $840,000
© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 13 CFIN5
13-11 Dividend payout ratio = 40%
a. Dividends last year = $130,000
b. Debt/assets ratio = 0.50
13-12 a. Net income = $760,000:
b. Net income = $580,000:
13-13 Total dividend = $0.95
13-14 Retained earnings break point = $720,000/0.6 = $1,200,000
The following table summarizes the capital budgeting decision:
Project Cost Costs IRR WACC Acceptable?*
A $684,000 $ 684,000 16.0% 10.0% Yes, IRR > WACC
© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 13 CFIN5
13-15 Dividend payments this year = $20,000(1.05) = $21,000
Retained earnings = $39,000 - $21,000 = $18,000
13-16 Pre-split price = $225
13-17 a. Post-split price = $15 x 4 = $60
13-18 Post-split dividend = $0.55
© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 13 CFIN5
13-19 Following is the equity section of the balance sheet prior to the stock dividend:
Common stock (12,000 shares outstanding, $2 par value) $24,000
Additional paid-in capital 16,000
Following is the equity section of the balance sheet after the 10 percent stock dividend:
13-20 Following is the equity section of the balance sheet prior to the stock split:
Common stock (12,000 shares outstanding, $2 par value) $24,000
Following is the equity section of the balance sheet after the stock split:
Common stock (60,000 shares outstanding, $0.40 par value) $24,000
The only change is the number of outstanding shares and the par value per share:
© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
