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14 fi516 - 14-10 Answer a Keenan company dividend policy...

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14-10 Answer a Keenan company dividend policy Answer 1 Growth 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 b The company could adopt policy by mentioning that the extra dividend this year will not be this is due to significant increase in profits due to introduction of the new product line. If com that could increase future earnings. So it can pay its regular dividend and could invest in th attitudes of share holders of the company. Because some shareholders prefer cash dividen profitable projects in order to increase the returns in future. So they could get returns throu
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