Chapter 14 Problem 12 Build a Model help

Chapter 14 Problem 12 Build a Model help - Ch 14-12 Build a...

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Ch 14-12 Build a Model Input Data Dividend per share $3.00 Target equity ratio 60% Target debt ratio 40% Shares outstanding 1,000,000 Net Income $8,000,000 Total capital budget $10,000,000 Required retained earnings = Total capital budget x Target equity ratio Required retained earnings = x Required retained earnings = Dividend per share = (Net Income - Required RE) / Shares outstanding Dividend per share = - / Dividend per share = So, following the residual policy would require a dividend cut. Dividend payout ratio = Dividend paid / Net Income Dividend payout ratio = / Dividend payout ratio = Desired DPS = $3.00 Retained earnings for cap. budget = Net Income - DPS x # of shares Retained earnings for cap. budget = - x Retained earnings for cap. budget = Look at the the capital budget for the upcoming year. It has paid a $3.00 dividend per share (DPS) for the past several years, and its shareholders expect the dividend to remain constant for the next several years. The company's target capital structure is 60 percent equity and 40 percent debt. It has 1,000,000 shares of
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This note was uploaded on 02/02/2011 for the course FINC 350 taught by Professor Johnson during the Spring '11 term at UCLA.

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Chapter 14 Problem 12 Build a Model help - Ch 14-12 Build a...

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