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Unformatted text preview: 14-10Answer aKeenan company dividend policyAnswer 1Growth rate 10 %Previous year dividend $3,600,000 Long run dividend $3,960,000 Answer 2 Previous year dividend $3,600,000 Previous year net income $10,800,000 Current year earning expected $14,400,000 2010 dividend payout ratio = 33%Current year dividend expected $4,800,000 Answer 3 Expected profitable investment $8,400,000 Target debt 40% then rest profit 60%Current year earning expected $14,400,000 Equity financing required in debt $5,040,000 residual income left after financing of$9,360,000 prposal Answer 4 Long Run dividend (regular dividend)$3,960,000 Equity financing required in debt (extra)$5,400,000 Answer bThe company could adopt policy by mentioning that the extra dividend this year will not bethis is due to significant increase in profits due to introduction of the new product line. If cothat could increase future earnings. So it can pay its regular dividend and could invest in thattitudes of share holders of the company. Because some shareholders prefer cash dividenprofitable projects in order to increase the returns in future. So they could get returns throuAnswer c...
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This note was uploaded on 08/14/2011 for the course FINANCE f516 taught by Professor John during the Spring '11 term at DeVry Chicago.
- Spring '11