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Silvana Inc. projects the following data for the coming year. If the firm follows the residual...
Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm’s capital structure consists of...
Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm’s capital structure consists of 40 percent debt and 60 percent equity, and its marginal tax rate is 40 percent. The company pays a 10 percent interest rate on its $5,000,000 of long-term debt. One million shares of common stock are outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $1,200,000, and it will fund this project in accordance with...
Your company has decided that its capital budget during the coming year will be RM15 million....
Your company has decided that its capital budget during the coming year will be RM15 million. Its optimal capital structure is 60% equity and 40% debt. Its earnings before interest and taxes (EBIT) are projected to be RM26 million for the year. The company has RM150 million of assets; its average interest rate on outstanding debt is 10%; there are 6 million common stocks issued and its tax rate is 40%. a) If the company follows the residual dividend model...
(Residual dividend policy) FarmCo, Inc. follows a policy of paying out cash dividends equal to the...
(Residual dividend policy) FarmCo, Inc. follows a policy of paying out cash dividends equal to the residual amount that remains after funding 20 percent of its planned capital expenditures. The firm tries to maintain a 20 percent debt and 80 percent equity capital structure and does not plan on issuing more stock in the coming year. FarmCo's CFO has estimated that the firm will earn $20 million in the current year. a. If the firm maintains its target financing mix...
FarmCo, Inc. follows a policy of paying out cash dividends equal to the residual amount that...
FarmCo, Inc. follows a policy of paying out cash dividends equal to the residual amount that remains after funding 40 percent of its planned capital expenditures. The firm tries to maintain a 40 percent debt and 60 percent equity capital structure and does not plan on issuing more stock in the coming year. FarmCo's CFO has estimated that the firm will earn $ 19 million in the current year. a. If the firm maintains its target financing mix and does...
(Residualdividendpolicy) FarmCo, Inc. follows a policy of paying out cash dividends equal to the residual amount...
(Residualdividendpolicy) FarmCo, Inc. follows a policy of paying out cash dividends equal to the residual amount that remains after funding 50 percent of its planned capital expenditures. The firm tries to maintain a 50 percent debt and 50 percent equity capital structure and does not plan on issuing more stock in the coming year. FarmCo's CFO has estimated that the firm will earn $16 million in the current year. a. If the firm maintains its target financing mix and does...
A firm has Net Income of $800,000, a capital budget of $2,000,000, and a target debt...
A firm has Net Income of $800,000, a capital budget of $2,000,000, and a target debt ratio of 70%. If the firm follows a residual dividend policy, then what is their payout ratio? 25% b. 33% c. 40% d. 50%
27. Portland Plastics Inc. has the following data. If it follows the residual dividend policy, what...
27. Portland Plastics Inc. has the following data. If it follows the residual dividend policy, what is its forecasted dividend payout ratio? Capital budget Debt Net income (NI) $14,500 408 $12,000 a. 25.368 b. 27.508 c. 30.40% d. 35.208 e. 38.268
14. The residual dividend modelThe residual dividend policy approach to dividend policy isbased on...
14. The residual dividend modelThe residual dividend policy approach to dividend policy is based on the theory that a firm’s optimal dividend distribution policy is a function of the firm’s target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings.Consider the case of Yellow Duck Distribution Company:Yellow Duck Distribution Company has generated earnings of $240,000,000. Its target capital structure consists of 60% equity...
Harris Company must set its investment and dividend policies for the coming year. It has three...
Harris Company must set its investment and dividend policies for the coming year. It has three independent projects from which to choose, each of which requires a $5 million investment. These projects have different levels of risk, and therefore different costs of capital. Their projected IRRs and costs of capital are as follows: Project A: Cost of capital = 15%; IRR = 18% Project B: Cost of capital = 14%; IRR = 9% Project C: Cost of capital = 7%;...
Grandin Inc. is evaluating its dividend policy. It has a capital budget of $625,000, and it...
Grandin Inc. is evaluating its dividend policy. It has a capital budget of $625,000, and it wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts a net income of $475,000. If it follows the residual dividend policy, what is its forecasted dividend payout ratio?
27. Portland Plastics Inc. has the following data. If it follows the residual dividend policy, what is its forecasted dividend payout ratio? Capital budget Debt Net income (NI) $14,500 408 $12,000 a. 25.368 b. 27.508 c. 30.40% d. 35.208 e. 38.268
Harris Company must set its investment and dividend policies for the coming year. It has three independent projects from which to choose, each of which requires a $5 million investment. These projects have different levels of risk, and therefore different costs of capital. Their projected IRRs and costs of capital are as follows: Project A: Cost of capital = 15%; IRR = 18% Project B: Cost of capital = 14%; IRR = 9% Project C: Cost of capital = 7%;...
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