Question

Last year, Apple Inc. had net income of $129 million and paid out $38.7 million in the form of dividends. This year, the company has a net income of $154.8. It has identified positive NPV projects that require $139.32 million in funding. The company's target debt ratio (debt/asset) is 0.5. The company has 6 million shares outstanding.

1. If the company wants to maintain the same payout ratio as last year, what should be the dividend per share (in $)?

2. If the company wants to maintain the same dividend per share as last year, what will be the payout ratio?

3. If the company follows a residual dividend policy, what will be the payout ratio?

Answer 1

Last a year ret income = $ 129 milliony dividend paid = $38.7 milions. pay out ration for lest year = 38 38.7 = 0.30 year, company net income $ 154.8 milion. o y company wants to maintains the . same pay out ratio as pst year so that divid and paid = net income a pay out ratio de = 154.8x0.3 c) 46,44 million dividand per share = 46.44 = 1774)

o company wants to maintain 2 the per share as lest year same dividend last year dividend per are I lest year dividend La test nof shares - - G.45 so that this year dividand also 6.45 per share this year dividend paid a) 2 646x6 = 38.7 million year. Net Income is 154.8 million this go pay out sako -> 47 >> 0.25 154.8

o 2 company follows residual dividend policy Net aincome $ 154.8 million. There is a positive app. Npv of project which requires $ 139.32 millions funding debt ratio = 0.5. project fund which is financed by equity that meems retained an earnings -) 199.52*9.5 =) 99,88 milliang. Therefore amouhut auailable for an distribution of dividand is =) a) 184.8 - 4436692.88 61.92 millions so that pel pay out ratio o s dividend paid to Net income the 61.92 154.8 - 0.40)