Gerrard Construction Co. is an excavation contractor. The following summarized data (in thousands)

Gerrard
Construction Co. is an excavation contractor. The following summarized
data (in thousands) are taken from the December 31, 2007, financial
statements:
FOR THE YEAR ENDED DECEMBER 31, 2007:
Net Revenue.. $16,100
Cost of Services Provided.5,700
Depreciation expense3,250
Operating Income..$7,150
Interest Expense.1,900
Income Tax expense..1,600
Net Income$3,650

AT DECEMBER 31, 2007
ASSETS
Cash and short-term investments$1,400
Accounts receivable, net.4,900
Property, plant, and equipment, net38,700
Total Assets$45,000
LIABILITIES AND OWNERS EQUITY
Accounts payable$750
Income taxes payable.800
Notes payable (long term).23,750
Paid-in capital5,000
Retained earnings14,700
Total liabilities and owners equity..$45,000
At
December 31,2006 total assets were $41,000 and total owners equity was
$16,300. There were no changes in notes payable or paid-in capital
during 2007.
Question Number 1
Gerrard Construction Company wishes to lease some new earth moving equipment fromCaterpillar
on a long-term basis. What impact (increase, decrease, or no effect)
would a capital lease of $2 million have on the companys debt ratio and
debt/equity ratio?
Question Number 2
Calculate
the amount of dividends declared and paid during the year ended
December 31, 2007 (Hint: Do a T-account analysis of retained earnings.)
Question Number 3
Review the answer to question number 2. At this time assume that Gerrard Construction Co. had1,200,000 shares of $1 par value common stock outstanding throughout 2007, and that the marketprice per share of common stock at December 31, 2007 was $18.75. Calculate the followingprofitability measures for the year ended December 31, 2007.
1. Earnings per share of common stock
2. Price/earnings ratio
3. Dividend yield
4. Dividend payout ratio