18-6. Continued Solution: Interactive Technology Earnings Payout Ratio Dividends Stage $.20 Stage 2.00 10% $20 Stage Ill 2.80 40% $l.12 Stage Iv 3.00 60% $l.80 b. Total dividends shares x dividends per share 425x1.80=$765 Aftertax income total dividends x(1-t) $765X 15 $765X(85)=$650.25 c. Stock dividends or stock splits are most likely to be utilized during stage II(growth or stage Ill(expansion) Squash Delight, Inc has the following balance sheet Assets $100,000 Accounts receivable 300.000 Fixed assets 600000 Total assets l.000.000 Liabilities Accounts payabl 150.000 50,000 Capital Common stock(50,000 shares @ $2 par) 100,000 Accounts Capital in excess of par 200.000 Retained earnings 500.000 S-633 Copyright o 2005 by The McGraw-Hill Companies, IncCopyright © 2005 by The McGraw-Hill Companies, Inc. S-633 18-6. Continued Solution: Interactive Technology a. Earnings Payout Ratio Dividends Stage I $ .20 0 0 Stage II 2.00 10% $ .20 Stage III 2.80 40% $1.12 Stage IV 3.00 60% $1.80 b. Total Dividends = shares x dividends per share = 425 x 1.80 = $765 Aftertax income = total dividends x (1 – T) = $765 x (1 – .15) = $765 x (.85) = $650.25 c. Stock dividends or stock splits are most likely to be utilized during stage II (growth) or stage III (expansion). 18-7. Squash Delight, Inc. has the following balance sheet: Assets Cash........................................................................................ $ 100,000 Accounts receivable................................................................ 300,000 Fixed Assets........................................................................... 600,000 Total Assets...................................................................... $1,000,000 Liabilities Accounts payable ........................................... $ 150,000 Notes payable ................................................. 50,000 Capital Common stock (50,000 shares @ $2 par)...... 100,000 Accounts Capital in excess of par.................................. 200,000 Retained earnings........................................... 500,000 $1,000,000