Need this by Sunday afternoon

EXERCISE 12
EXERCISE 12.14
Home Depot, Inc.’s income statements for 2007, 2008, and 2009 show basic earnings per share of $2.38, $1.34, and $1.58, respectively. Diluted earnings per share figures are slightly lower than these numbers, indicating the impact of potential capital stock activity that could reduce earnings per share for cu
ent stockholders.
The company paid cash dividends of $0.90 per share in each of 2007, 2008, and 2009.
a. Why do you think Home Depot is paying out only about 38 percent to 67 percent of its net income to stockholders in the form of cash dividends?
A company generally pays out less than 100% as dividends for re-investment purpose. The retained amount (1-payout ratio) is then plowed back into the business in the form of a prospective profitable proposition. This in turn helps the company increase revenues and profits thereby leading to an increased payout to investors in the form of dividends.
    Payout ratio = Dividends/Net income
     
    FY07
    FY08
    FY09
    Dividends
    1,709
    1,521
    1,525
    Net Income
    4,395
    2,260
    2,661
    Payout ratio
    38.89%
    67.30%
    57.31%
In the instant case, one can see that the payout ratio has increased from ~39% in FY07 to ~57% in FY09. However, please note that the increase is not due to profitable investment made by the company of the retained earnings. This can be infe
ed from the decline in net profit from $1,709m in FY07 to $1,525m in FY09. Home Depot managed to increase the payout ratio because of retirement of common stock in FY07. Home Depot spent $24,239m in FY07 from the retained earnings for the purpose of retirement of common stock. Retirement of common stock means a reduction in the number of shares outstanding.
Apparently, it seems Home Depot is resorting to utilizing the retained earnings towards retirement of common stock.
. If you were an investor in Home Depot’s stock, would you be unhappy because your dividends represented such a small percentage of the company’s net income.
If I were an investor in Home Depot’s stock, I would have been unhappy by the manner in which Home Depot utilized its retained earnings. If Home Depot pays less to investors in the form of dividends and utilizes the undistributed amount towards the growth of the business, then as an investor I would not have been unhappy. Reason being, I am seeing future growth potential for the company and increased returns in the form of higher future dividends and capital appreciation too in the form of increased stock price.
EXERCISE 12.15
Use the financial statements of Home Depot, Inc.,...