Reference no: EM133095441
Question - In 2005 Keenan Company paid dividends totaling $ 3,600,000 on net income of $ 10.8 million. It was a normal year and in the last 10 years profits grew at a constant rate of 10%. But it is expected that in 2006 they will reach $ 14.4 million and that there will be profitable investment opportunities of $ 8.4 million. Keenan is expected to fail to maintain that level of growth - attributed to an exceptionally profitable new product line being introduced - and the previous growth rate of 10% will resume. The optimal debt ratio is 40 percent.
a. Calculate the total dividends in 2006, if you observe the following policies:
1) The 2006 dividend payment is established to ensure that they grow at the same rate as that of profits.
2) The 2005 payment reason continues.
3) A pure residual policy is applied, with all distributions through dividends (40% of the $ 8.4 million invested is financed with debt).
4) A regular dividend plus extras policy is applied, whereby dividends are based on the long-term growth rate, and extras are set in accordance with the residual policy.
b. Which of the above policies would you recommend? Limit your options to those included here and support your answer.
c. Does a dividend of $ 9 million in 2006 seem reasonable in light of your answers to parts a and b? If not, should the dividend be higher or lower?
Reference book - Corporate Finance: A Focused Approach by Ehrhardt and Brigham Second Edition.
|
What amount of revenue will sheridan report
: It billed customers $340 in May for lawns mowed but did not receive payment until July. Using cash-basis accounting, what amount of revenue will Sheridan report
|
|
Strategy for responding to picket lines and protests
: Strikes may be rare, but it is noteworthy that they have been occurring more frequently in recent years. It is prudent for HR professionals to consider includin
|
|
Checking candidates on various social media platforms
: Should informal background checks via checking candidates on various Social Media platforms?
|
|
Answers questions from the negotiations-the class
: Minimum 2 to 3-Page Paper - Answers Questions from the Negotiations & the Class, as a Whole:
|
|
Calculate the total dividends
: Question - In 2005 Keenan Company paid dividends totaling $ 3,600,000 on net income of $ 10.8 million. Calculate the total dividends
|
|
Discuss what treatment is indicated
: Your 80 year old male patient, admitted yesterday for pneumonia, has became confused, hypotensive, oliguric, clammy and pale.
|
|
Main characteristics of international recruitment
: As a newly hired project manager for a research team, you believe that you will be able to manage the project virtually from your office in Saudi Arabia
|
|
Effective hazard and risk management
: How does risk analysis contribute to effective hazard and risk management?
|
|
What is the new standard cost per table
: The company expects a 25% increase in the cost of oak and a 5% decrease in the cost of screws. What is the new standard cost per table
|