Homework Answers
given debt equity ratio = 2/3,
earning for the year = 24000, rest explained in image.
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PROBLEM 2 (4 points; 2 points for each part) A firm maintains a capital structure with...
A firm maintains a capital structure with debt-equity ratio of 2/3 and has $24,000 earnings for...
A firm maintains a capital structure with debt-equity ratio of 2/3 and has $24,000 earnings for the year-end. The firm follows a residual dividend policy. a. What is the maximum capital budget amount the firm can finance without raising external equity? b. Suppose the firm's capital structure before financing the maximum capital budget consisted of $500,000 debt and $750,000 equity. Calculate the firm's debt ratio after financing the maximum capital budget in part (a).
A firm maintains a capital structure with debt-equity ratio of 2/3 and has $24,000 earnings for...
A firm maintains a capital structure with debt-equity ratio of 2/3 and has $24,000 earnings for the year-end. The firm follows a residual dividend policy. a. What is the maximum capital budget amount the firm can finance without raising external equity? b. Suppose the firm's capital structure before financing the maximum capital budget consisted of $500,000 debt and $750,000 equity. Calculate the firm's debt ratio after financing the maximum capital budget in part (a).
The residual dividend policy approach to dividend policy is based on the theory that a firm's...
The 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 Red Bison Petroleum Producers Corporation: Red Bison Petroleum Producers Corporation is expected to generate $140,000,000 in net income over the next year. Red...
The residual dividend policy approach to dividend policy is based on the theory that a firm's...
The 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 Purple Hedgehog Forestry Group: Purple Hedgehog Forestry Group is expected to generate $240,000,000 in net income over the next year. Purple Hedgehog Forestry...
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...
The residual dividend policy approach to dividend policy is based on the theory that a firm's...
The 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 Red Bison Petroleum Producers Inc.: Red Bison Petroleum Producers Inc. has generated earnings of $180,000,000. Its target capital structure consists of 60% equity...
PROBLEM 4 The capital structure of the Valley Products Company is as shown below, on April...
PROBLEM 4 The capital structure of the Valley Products Company is as shown below, on April 30, 2019. Long term Debt (8%) $ 128,000,000 Common Stockholders equity (8 million shares) 192,000,000 = $ 320,000,000 The company believes this capital structure to be optimal and therefore desires to maintain it. That is, DO NOT CHANGE IT. The company estimates next years net income, NII, will be $48 million. Its payout ratio is expected to remain at 25 percent. New bonds...
Silvana Inc. projects the following data for the coming year. If the firm follows the residual...
Silvana Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be? $525,000 40% EBIT $2,000,000 Capital budget Interest rate 10% % Debt Debt outstanding $5,000,000 % Equity Shares outstanding 5,000,000 Tax rate Select the correct answer. 60% 40% O a. 62.15% b. 65.00% O c. 65.95% d. 64.05% e. 63.10%
A firm plans to grow at an annual rate of at least 25%. Its return on equity is 39%. Suppose the firm has a debt-equity ratio of 1/4. What is the maximum dividend payout ratio it can maintain without...
A firm plans to grow at an annual rate of at least 25%. Its
return on equity is 39%. Suppose the firm has a debt-equity ratio
of 1/4. What is the maximum dividend payout ratio it can maintain
without resorting to any external financing? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.)
Maximum dividend payout ratio
Maximum dividend payout ratio
ABC, Inc. has 25,000 shares of stock outstanding at a market price of $20. The firm...
ABC, Inc. has 25,000 shares of stock outstanding at a market price of $20. The firm has $500,000 in outstanding debt. Earnings for next year are projected at $100,000. The firm plans on spending $120,000 on capital projects next. The firm also maintains a constant debt-equity ratio. What is the projected dividend amount per share if the firm follows a residual dividend policy? A $ 20 B $ 0 c $60 D $1.20 E $1.60
The 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 Red Bison Petroleum Producers Corporation: Red Bison Petroleum Producers Corporation is expected to generate $140,000,000 in net income over the next year. Red...
The 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 Purple Hedgehog Forestry Group: Purple Hedgehog Forestry Group is expected to generate $240,000,000 in net income over the next year. Purple Hedgehog Forestry...
The 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 Red Bison Petroleum Producers Inc.: Red Bison Petroleum Producers Inc. has generated earnings of $180,000,000. Its target capital structure consists of 60% equity...
Silvana Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be? $525,000 40% EBIT $2,000,000 Capital budget Interest rate 10% % Debt Debt outstanding $5,000,000 % Equity Shares outstanding 5,000,000 Tax rate Select the correct answer. 60% 40% O a. 62.15% b. 65.00% O c. 65.95% d. 64.05% e. 63.10%
A firm plans to grow at an annual rate of at least 25%. Its
return on equity is 39%. Suppose the firm has a debt-equity ratio
of 1/4. What is the maximum dividend payout ratio it can maintain
without resorting to any external financing? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.)
Maximum dividend payout ratio
Maximum dividend payout ratio
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