Dividend policy is to maintain a constant payout ratio

Assignment Help Financial Management

Reference no: EM13877876

AFB, Inc.’s dividend policy is to maintain a constant payout ratio. This year AFB, Inc. paid out a total of $2 million in dividends. Next year, AFB, Inc.’s sales and earnings per share are expected to increase. Dividend payments are expected to:

A. increase above $2 million only if the company issues additional shares of common stock

B. decrease below $2 million

C. increase above $2 million

D. remain at $2 million

Reference no: EM13877876

Questions Cloud

Opportunity to invest in project : Excellent Inc. has an opportunity to invest in a project that will pay $1,000 at the end of year 1, and each year afterward the payoff will increase by 6 percent, so that at the end of year 2, the payoff will be $1,060. If the appropriate discount ra..

Spontaneous sources of funds refer : Spontaneous sources of funds refer to all of the below EXCEPT:

Limitation of the percent of sales method : Which of the following is a limitation of the “percent of sales method” of preparing pro forma financial statements?

Dividend policy results in most consistent dividend stream : In industries with volatile earnings, the residual dividend policy results in the most consistent dividend stream. If the clientele effect is correct, firms should follow a constant dividend payout ratio policy. In general, the higher the number of p..

Dividend policy is to maintain a constant payout ratio : AFB, Inc.’s dividend policy is to maintain a constant payout ratio. This year AFB, Inc. paid out a total of $2 million in dividends. Next year, AFB, Inc.’s sales and earnings per share are expected to increase. Dividend payments are expected to:

Higher percentage of debt compared to equity : Which of the following strategies may be used to alter a firm’s capital structure toward a higher percentage of debt compared to equity?

Moderate view of capital costs and financial leverage : According to the moderate view of capital costs and financial leverage, as the use of debt financing increases:

What proportion of firm is equity financed : What proportion of a firm is equity financed if the WACC is 14%, the after-tax cost of debt is 7.0%, the tax rate is 35%, and the required return on equity is 18%?

Covered interest arbitrage : Covered Interest Arbitrage. Assume the following information: Quoted Price Spot rate of Canadian dollar $.80 90-day forward rate of Canadian dollar $.79 90-day Canadian interest rate 4% 90-day U.S. interest rate 2.5% 1- Given this information, what w..

User Account

All Pages