Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 14, Problem 7P
DIVIDENDS Brooks Sporting Inc. is prepared to report the following 2019 income statement (shown in thousands of dollars).
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 320,000 shares of common stock outstanding, and its stock trades at $37 per share.
- a. The company had a 25% dividend payout ratio in 2018. If Brooks wants to maintain this payout ratio in 2019, what will be its per-share dividend in 2019?
- b. If the company maintains this 25% payout ratio, what will be the current dividend yield on the company’s stock?
- c. The company reported net income of $1.35 million in 2018. Assume that the number of shares outstanding has remained constant. What was the company’s per-share dividend in 2018?
- d. As an alternative to maintaining the same dividend payout ratio. Brooks is considering maintaining the same per-share dividend in 2019 that it paid in 2018. If it chooses this policy, what will be the company’s dividend payout ratio in 2019?
- e. Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Explain.
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During the annual general meeting, the management team of HamstarCorporation has reported the annual dividend distributed from year 2019 to 2022. In last year (year 2020), the annual dividend has been increased by RM0.30 . As the management team foresees that the company profit would be increased by 50%, they plan to increase the annual dividend by more than RM0.30 for this year and the year afterwards. The detail of the annual dividends is as following:
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2020
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2021
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2022
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Start from 2023onwards, Hamstar Corporation will have an annual growth rate of 5 percent consistently for the dividend. Using the appropriate dividend Valuation Model, calculate the intrinsic value of Hamstar Corporation. Assume that the required rate of return is 10percent.
Brooks Sporting Inc. is prepared to report the following 2018 income statement(shown in thousands of dollars).
Prior to reporting this income statement, the company wants to determine its annual dividend.The company has 320,000 shares of common stock outstanding, and its stock tradesat $37 per share.a. The company had a 25% dividend payout ratio in 2017. If Brooks wants to maintainthis payout ratio in 2018, what will be its per-share dividend in 2018?b. If the company maintains this 25% payout ratio, what will be the current dividendyield on the company’s stock?c. The company reported net income of $1.35 million in 2017. Assume that the numberof shares outstanding has remained constant. What was the company’s per-share dividendin 2017?d. As an alternative to maintaining the same dividend payout ratio, Brooks is consideringmaintaining the same per-share dividend in 2018 that it paid in 2017. If it choosesthis policy, what will be the company’s dividend payout ratio in 2018?e. Assume…
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Chapter 14 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 14 - Prob. 1QCh. 14 - Prob. 2QCh. 14 - Would it ever be rational for a firm to borrow...Ch. 14 - Modigliani and Miller (MM), on the one hand, and...Ch. 14 - Prob. 5QCh. 14 - One position expressed in the financial literature...Ch. 14 - Prob. 7QCh. 14 - What is the difference between a stock dividend...Ch. 14 - Most firms like to have their stock selling at a...Ch. 14 - Prob. 10Q
Ch. 14 - Prob. 11QCh. 14 - RESIDUAL DIVIDEND MODEL Altamonte...Ch. 14 - Prob. 2PCh. 14 - STOCK REPURCHASES Gamma Industries has net income...Ch. 14 - Prob. 4PCh. 14 - EXTERNAL EQUITY FINANCING Coastal Carolina Heating...Ch. 14 - RESIDUAL DIVIDEND MODEL Walsh Company is...Ch. 14 - DIVIDENDS Brooks Sporting Inc. is prepared to...Ch. 14 - Prob. 8PCh. 14 - ALTERNATIVE DIVIDEND POLICIES In 2018, Keenan...Ch. 14 - Prob. 10SPCh. 14 - Prob. 11ICCh. 14 - Prob. 1TCLCh. 14 - Prob. 2TCLCh. 14 - Prob. 3TCLCh. 14 - Investors are more concerned with future dividends...Ch. 14 - Prob. 5TCL
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