Final earnings estimate for Alltime Fitness Center have been prepared for the CFO of the company and are shown in the following table. The firm has 7,500,000 shares of common stock outstanding. As assistant to the CFO, you are asked to determine the yearly dividend per share to bepaid depending on the following possible policies: A stable dollar dividend targeted at 40 percent of earnings over a 5-year period.A small, regular dividend of $0.60 per share plus a year-end extra when the profits in any year exceed $20 million. The year-end extra dividend will equal 50 percent of profits exceeding $20 million.A constant dividend payout ratio of 40 percent. YearProfit after tax ($’million)118221319423525 Explain the pros and cons of each dividend policie

A stable dollar dividend targeted at 40 percent of earnings over a 5-year period. 1 year income…

Answered: Final earnings estimate for Alltime…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

See similar textbooks

Related questions

Question

Final earnings estimate for Alltime Fitness Center have been prepared for the CFO of the company and are shown in the following table. The firm has 7,500,000 shares of common stock outstanding. As assistant to the CFO, you are asked to determine the yearly dividend per share to be

paid depending on the following possible policies:

A stable dollar dividend targeted at 40 percent of earnings over a 5-year period.
A small, regular dividend of $0.60 per share plus a year-end extra when the profits in any year exceed $20 million. The year-end extra dividend will equal 50 percent of profits exceeding $20 million.
A constant dividend payout ratio of 40 percent.

Year	Profit after tax ($’million)
1	18
2	21
3	19
4	23
5	25

Explain the pros and cons of each dividend policie

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions