how did we get (1,075,000) on answer B below? also on C where did 0.16...
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how did we get (1,075,000) on answer B below?
also on C where did 0.16 in year 2 and 0.28 in year 4 come from?
66)Trevor Co.'s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding, what will the yearly dividend per share be if the dividend policy is
Trevor & Co.
1 $ 900,000
2 1,200,000
3 850,000
4 1,350,000
a. a constant payout ratio of 40%
b. stable dollar dividend targeted at 40% of the average earnings over the four-year period
c. small, regular dividend of $0.75 plus a year-end extra of 40% of profits exceeding $1,000,000
Answer:
a.
.40(900,000)/500,000 = $0.72
.40(1,200,000)/500,000 = 0.96
.40(850,000)/500,000 = 0.68
.40(1,350,000)/500,000 = 1.08
b. .40(1,075,000) = $430,000/500,000 $0.86
c.
Year 1 $0.75 = $0.75
Year 2 0.75 + 0.16 = 0.91
Year 3 0.75 = 0.75
Year 4 0.75 + 0.28 = 1.03
Answer & Explanation
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