explain the residual distribution model used by most firms?
explain the residual distribution model used by most firms?
Homework Answers
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...
OOOOOOO 15-7: Setting the Target Distribution Level: The Residual Distribution Model 15-8: The Residual Distribution Model...
OOOOOOO 15-7: Setting the Target Distribution Level: The Residual Distribution Model 15-8: The Residual Distribution Model in Practice Problem 15-10 Alternative Dividend Policies Boehm Corporation has had stable earnings growth of 6% a year for the past 10 years, and in 2015 Boehm paid dividends of $3.2 million on net income of $19.5 million. However, in 2016 earnings are expected to jump to $31.2 million, and Boehm plans to invest $15.6 million in a plant expansion. This one-time unusual earnings...
The Residual Dividend Model is rarely used in practice. Instead companies use this model to set...
The Residual Dividend Model is rarely used in practice. Instead companies use this model to set a maximum dividend. Why is this? Question options: More than one answer can be correct The residual dividend model results in a volatile dividend. There is no Cliental for the residual dividend model. Stock investors like constantly changing dividends Stock investors like stable predictable dividends.
Residual Distribution Model Puckett Products is planning for $2.2 million in capital expenditures next year. Puckett's...
Residual Distribution Model Puckett Products is planning for $2.2 million in capital expenditures next year. Puckett's target capital structure consists of 50% debt and 50% equity. If net income next year is $2.9 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places. %
4. The income distribution effects in the specific factors and H (a) Explain the effect internati...
4. The income distribution effects in the specific factors and H (a) Explain the effect international trade on income distribution predicted by the specific factors model Your explanation should be in most general terms, that is, not in terms of cloth and food or labor and capital but in the terms used by the specific factors model mobile factor and specific factor. (b) In a similar fashion, explain the effect international trade on income distribution predicted by the Heckscher-Ohlin model....
state true or false and briefly explain your answer 5. Firms that do not pay any...
state true or false and briefly explain your
answer
5. Firms that do not pay any dividends cannot be valued using dividend discount model but can be valued using residual income model. 6. A company's cost of debt is the contracted rate that it pays on its outstanding debt. 7. Enterprise value (EV) to EBITDA ratio is better than price to earnings ratio for relative valuation. 8. Price to EBITDA ratio should not be used for relative valuation.
23.) Market auction preferred stock is popular with large commercial banks. 24.) The residual distribution model...
23.) Market auction preferred stock is popular with large commercial banks. 24.) The residual distribution model minimizes flotation and equity signaling costs. 25.) The greater the use of debt, the greater the concentration of risk on stockholders 26.) A reverse split is a way to increase the number of shares outstanding.
Explain, using our increasing returns model with firms that have different marginal costs and some cost...
Explain, using our increasing returns model with firms that have different marginal costs and some cost to export (t), how an increase in tariffs affects firms’ entry/exit in exporting, and firms’ export sales. Draw a diagram(s) to help you explain
a. Poisson distribution was used to model the number of arrivals per minute at a bank...
a. Poisson distribution was used to model the number of arrivals per minute at a bank located in the central business district of a city. Suppose that the actual arrivals per minute were observed in 200 01e. minute periods over the course of a week are given below. Determine whether the number of arrivals per minute follows a Poisson distribution Frequency 14 31 47 41 29 21 10 Arrivals 2 6 8 Total 1 -8 CI- b. In the z...
14. The stock valuation model, PO = D1/(rs - g), can be used to value firms...
14. The stock valuation model, PO = D1/(rs - g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate. True False
OOOOOOO 15-7: Setting the Target Distribution Level: The Residual Distribution Model 15-8: The Residual Distribution Model in Practice Problem 15-10 Alternative Dividend Policies Boehm Corporation has had stable earnings growth of 6% a year for the past 10 years, and in 2015 Boehm paid dividends of $3.2 million on net income of $19.5 million. However, in 2016 earnings are expected to jump to $31.2 million, and Boehm plans to invest $15.6 million in a plant expansion. This one-time unusual earnings...
4. The income distribution effects in the specific factors and H (a) Explain the effect international trade on income distribution predicted by the specific factors model Your explanation should be in most general terms, that is, not in terms of cloth and food or labor and capital but in the terms used by the specific factors model mobile factor and specific factor. (b) In a similar fashion, explain the effect international trade on income distribution predicted by the Heckscher-Ohlin model....
state true or false and briefly explain your
answer
5. Firms that do not pay any dividends cannot be valued using dividend discount model but can be valued using residual income model. 6. A company's cost of debt is the contracted rate that it pays on its outstanding debt. 7. Enterprise value (EV) to EBITDA ratio is better than price to earnings ratio for relative valuation. 8. Price to EBITDA ratio should not be used for relative valuation.
23.) Market auction preferred stock is popular with large commercial banks. 24.) The residual distribution model minimizes flotation and equity signaling costs. 25.) The greater the use of debt, the greater the concentration of risk on stockholders 26.) A reverse split is a way to increase the number of shares outstanding.
a. Poisson distribution was used to model the number of arrivals per minute at a bank located in the central business district of a city. Suppose that the actual arrivals per minute were observed in 200 01e. minute periods over the course of a week are given below. Determine whether the number of arrivals per minute follows a Poisson distribution Frequency 14 31 47 41 29 21 10 Arrivals 2 6 8 Total 1 -8 CI- b. In the z...
14. The stock valuation model, PO = D1/(rs - g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate. True False
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