Question

​(Alternative dividend policies​) Final earnings estimates for the Smithfield Meat Packing Company have been prepared for the CFO of the company and are shown in the following​ table:

YEAR PROFITS AFTER TAXES 1 18,000,000 2 21,000,000 3 19,000,000 4 23,000,000 5 25,000,000

The firm has 7,700,000 shares of common stock outstanding. As assistant to the​ CFO, you are asked to determine the yearly dividend per share to be paid depending on the following possible​ policies: a. A stable dollar dividend targeted at 50 percent of earnings over a​ 5-year period. b. A​ small, regular dividend of ​$0.50 per share plus a​ year-end extra when the profits in any year exceed ​$20000000. The​ year-end extra dividend will equal 60 percent of profits exceeding ​$20000000. c. A constant dividend payout ratio of 35 percent.

Answer 1

PART A
Total dividend	DPS
9000000	1.17
10500000	1.36
9500000	1.23
11500000	1.49
12500000	1.62

PART B
Extra dividend	DPS
0	0.50
600000	0.58
0	0.50
1800000	0.73
3000000	0.89

PART C
Total dividend	DPS
6300000	0.82
7350000	0.95
6650000	0.86
8050000	1.05
8750000	1.14

Workings

Book1- Excel AutoSave Oi Sign in Comments Share O Tell me what you want to do File Home Formulas Review View Help Insert Draw Page Layout Data Σ X Insert == A A Calibri General 9 Delete Conditional Format as Cell Sort & Find 8 Paste A в I B IU E- Format T T T Formatting Table Filter Select Styles Font Clipboard Alignment Number Styles Cells Editing г. B12 A B C D E F G H K L 7 8 9 10 11 12 PART A PART B PART C 13 Profits Tolal dividend DPS Extra dividend Ir(C14>20000000,60% *(C14 20000000),0) 0.5+G14 / 7700000 IF(C15>20000000,60%*(C15 20000000),0) -0.5+G15/7700000 DPS Year DPS Tolal dividend 18000000 C14 50 % 14 D14/7700000 -D15/7700000 C14 35 % 14/7700000 115/7700000 16/7700000 15 C15*50% C15 35 % 2 21000000 19000000 23000000 -C16 50 % -C17*50 % C18*50 % 16 =D16/7700000 IF(C16>200000000,60%*(C16-20000000),0) -0.5+G16/7700000 IFIC17>20000000,60% * (C.17-20000o00),0) =0.5+G17/7700000 C16*35 % 3 D17/7700000 17 -C17*35% 17/7700000 4. 18 25000000 D18/7700000 IF(C18>20000000,60%*(C18-20000000),0) =0.5+G18/7700000 -C1835 % 18/7700000 19 20 21 22 23 24 25 26 Sheet Sheet2 Sheet3 Sheet4 E Ready 100% ха ENG 11:02 AM (?