Function of its target capital structure

Assignment Help Other Subject
Reference no: EM132351132

The residual dividend policy approach is based on the theory that a company's optimal distribution policy is a function of its target capital structure, the investment opportunities available to the firm, and the availability and cost of its external capital. The firm makes distributions to its shareholders based on its residual earnings.

Consider the following example:

Allied Biscuit Company has generated earnings of $1,400,000. Its target capital structure consists of 60% equity and 40% debt. It plans to spend $85,000 on capital projects over the next year and expects to finance this investment in the same proportion as its capital structure. The company makes distributions in the form of dividends.

Allied Biscuit's dividend payout ratio will be (72.27% , 81.91% , 96.36% , 106.00) if it follows a residual dividend policy.

Reference no: EM132351132

Questions Cloud

Commercial landscaping business : Which type of fund do you think can help you obtain your investment goals? Explain.
Diversified lines of business : In those circumstances, the CAPM is less useful than it would be otherwise, when firms have more diversified lines of business.
Idiosyncratic risk in preparing initial bid for target : What is the role of idiosyncratic risk in preparing an initial bid for the target firm?
Identify successes of lesson plan delivery : Identify successes of lesson plan delivery as well as areas of potential growth. Be sure to explain how you will use your findings in your future professional.
Function of its target capital structure : The residual dividend policy approach is based on the theory that a company's optimal distribution policy is a function of its target capital structure
Why the least restrictive interventions should always be use : F/601/3764-HSC 3045 Promote positive behaviour-Explain who needs to be informed of any incidents where restrictive interventions have been used.
Why is insurance important : Why is insurance important? Choose two types of insurance and discuss their characteristics.
Calculate the opportunity cost of capital : A share of stock with a beta of 0.84 now sells for $69. Investors expect the stock to pay a year-end dividend of $4.
What is the balance in the accounts receivable account : On December 31, 2008, the net realizable value of a company's receivables was 528,700. What is the balance in the Accounts Receivable account

Reviews

Write a Review

Other Subject Questions & Answers

  Discuss the most challenging public health issues

Discuss and describe the most challenging public health issues facing healthcare in 2017 and current efforts (nationally and internationally) to improve.

  Explain the origins of the tort liabiliy

Should both civil and criminal court cases be proven in the same manner? In other words, should either preponderance of evidence and beyond reasonable doubt be abolished and/or replaced with one standard of proof? Why?

  Which approach would you use to guide this intake interview

Which approach would you use to guide this intake interview? Explain why you think this approach is a good choice for this particular interview. Also develop at least 5 questions for your interview and explain how the questions fit with the appro..

  Summarize federal drug regulations

Explain how the healthcare workplace is affected by federal laws regarding hiring and firing, discrimination, and other workplace regulations.

  What type of variables can be used as dvs

What type of variables (categorical or numerical) can be used as IVs in a factorial MANOVA model? What type of variables can be used as DVs? Should we test normality for the IVs? Should we test normality for the DVs?

  Did you meet any of your short term goals

Did you meet any of your short term goals? Why or why not? Are you on target with your progress (EXPLAIN)? If not, HOW do you need to modify your next steps or short term goal?

  Which agency or bureau has the most influence and why

National security responsibilities fall across many agencies and bureaus in the federal government. Which agency or bureau has the most influence and why?

  Despite scientific consensus in detail

Vaccine controversies have occurred since almost 80 years before the terms vaccine and vaccination were introduced, and continue to this day.

  Represent a respondent mother in care proceedings

Write in relation to a matter whereby we represent a respondent mother in care proceedings - Would be grateful of you could provide us with cv's for psychologists for an adult psychologist assessment.

  Clinical staff members are not washing hands between patient

Clinical staff members are not washing their hands between patients. Employees are not knowledgeable in the use of fire extinguishers.

  What could we change or improve

If yes, provide examples of how America does this well. If no, what could we change or improve (and give examples)?

  The basic components and goals of a liberalist government

What are the basic components and goals of a socialist government?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd