Calculate Rohm total dividends

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Question - Rohm Corporation has had stable earnings growth of 10% a year for the past 10 years and in 2019 Rohm paid dividends of $3 million on net income of $10 million. However, in 2020 earnings are expected to jump to $15 million, and Rohm plans to invest $9 million in a plant expansion. This one-time unusual earnings growth won't be maintained, though, and after 2020 Rohm will return to its previous 10% earnings growth rate. Its target debt ratio is 40%. Calculate Rohm's total dividends for 2020 under each of the following policies: It uses a pure residual policy with all distributions in the form of dividends.

Reference no: EM133098608

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