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Question 4

Cullumber Medical manufactures hospital beds and other institutional furniture. The company's comparative balance sheet and income statement for 2015 and 2016 follow.

Cullumber Medical

Comparative Balance Sheet

As of December 3120162015AssetsCurrent assetsCash$330,000$417,450Accounts receivable, net1,067,200776,400Inventory742,000681,000Other current assets375,000247,050Total current assets2,514,2002,121,900Property, plant, & equipment, net9,812,3908,467,400Total assets$12,326,590$10,589,300Liabilities and Stockholders' EquityCurrent liabilities$3,102,000$2,846,100Long-term debt3,702,6503,892,650Total liabilities6,804,6506,738,750Preferred stock, $5 par value52,50052,500Common stock, $0.25 par value137,000103,800Retained earnings5,332,4403,694,250Total stockholders' equity5,521,9403,850,550Total liabilities and stockholders' equity$12,326,590$10,589,300

Cullumber Medical

Comparative Income Statement and Statement of Retained Earnings

For the Year20162015Sales revenue (all on account)$10,390,000$9,613,900Cost of goods sold4,173,0005,298,700Gross profit6,217,0004,315,200Operating expenses2,840,3002,634,100Net operating income3,376,7001,681,100Interest expense390,000308,600Net income before taxes2,986,7001,372,500Income taxes (30%)896,010411,750Net income$2,090,690$960,750Dividends paidPreferred dividends29,50029,500Common dividends423,000436,000Total dividends paid452,500465,500Net income retained1,638,190495,250Retained earnings, beginning of year3,694,2503,199,000Retained earnings, end of year$5,332,440$3,694,250

Calculate the dividend payout ratio (dividends of $1.04 per common share for the year) for 2016.(Round answer to 2 decimal places, e.g. 2.55%.)

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