Question

Let'ssuppose that you have a fim which 50000 USD in cash acquiresfrom other firm a factory with value fof Based on book values, we have the following records Equipment 16000 USD Land 14000 Buildings 20000 We also know that the appraised fir market value are Equipment 13000 Land 19000o Buildings 18000 We also know that the fair value of land after 20 years will vary between 40000-50000 USD and the fact that the usellfuness of a company will decline at aconstant rate/ How can we compute the amount of dividend for the first 2 years if we know the annual revenues of each year and the annual expense (without depreciation) of each year?

Answer 1

The values of fixed assets has nothing to do with the rate of dividend. Dividend is nothing but an obligation or payment made to the holders of shares in lieu of their contributions towards the capital of the company/ organisation.

If we know the number of shares of a company (firm), we can easily calculate the dividends by this formula:

Dividend (per share) = Total earnings attributable to shareholders/ Total number of shares

Total earnings attributable to shareholders = Annual Revenues - Annual Expenses (after depreciation)

In this way we can calculate the dividends.

Hope this solves your doubt.