Dividend_policy_ch_17_tutmemo.doc - M 312 Tut Chapter 17...

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M 312 Tut. Chapter 17 : Distributions to Shareholders (Dividend Policy) 1) Chandler Communications’ CFO has provided the following information: The company’s capital budget is expected to be R5,000,000. The company’s target capital structure is 70 percent debt and 30 percent equity. The company’s net income is R4,500,000. If the company follows a residual distribution policy (with all distributions in the form of dividends), what portion of its net income should it pay out as dividends this year? 2) Powell Products anticipates that its capital budget next year will be R3 million. The company expects to report net income of R5 million this year. The company’s target capital structure is 65 percent common equity and 35 percent long-term debt. Assume the company follows a strict residual distribution policy (with all distributions in the form of dividends). What is the expected dividend payout ratio this year? 3) Loiselle Graphics recently announced a 3-for-1 stock split. Prior to the split, the company’s stock was trading at R90 per share. The split had no effect on the wealth of
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