How much should firm return to stockholders as a dividend

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Question: LimeAde Corporation, a large soft drink manufacturing firm, is faced with the decision of how much to pay out as dividends to its stockholders. It expects to have a net income of $ 1000 (after depreciation of $500), and it has the following projects:

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The firm's beta is 1.5 and the current risk-free rate is 6%. The firm plans to finance net capital expenditures (cap ex -depreciation) and working capital with 20% debt. The firm also has current revenues of $5000, which it expects to grow at 8 %. Working capital will be maintained at 25% of revenues. How much should the firm return to its stockholders as a dividend?

Reference no: EM131690290

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