80.2K

Verified Solution

Link Copied!

The Get-A-Round-Tuit Company has provided the following financial statements for the year ending August 4, 2017:

a. If The Get-A-Round-Tuit Company uses a constant or stable cash dividend policy, what is the dividend expected by shareholders?

b. If The Get-A-Round-Tuit Company uses a retention ratio of 45%, what is the dividend expected by shareholders?

c. Next year the company is planning a major expansion where the investment in new fixed assets will be double the current value in the net fixed assets. The Get-A-Round-Tuit company will maintain its current debt-to-equity ratio (do not include A/P in the calculation) and a residual dividend policy. What is the dividend that shareholders can expect?

d. If The Get-A-Round-Tuit undertakes a 2:1 stock split, what is the dividend that shareholders can expect?

e. Prepare the adjusted financial statements for after the stock split.

f. You hold 10 blocks of The Get-A-Round-Tuit Company.

i. What is your wealth position before the stock split?

ii. What is your wealth position after the stock split?

iii. As a young investor, are you happy with the stock split?

Get-A-Round-Tuit Balance Steet August 4, 2017 ($millions) Get-A-Round-Tuit Income Statement (Smillions) Sales Bonds 6.0 Variable Costs Fixed Costs Interest Taxes EAT 45.22 15.00 5.00 0.22 10.00 15.00 Cash 10.0 VR 1.5 Equity Total Current Assets 14.5 8.0 Total Assets 22.5 Common Shares (5 million o/s)3.0 Retained Earnings 12.0 Net Fixed Assets 8 Total Li ablities and Equity Dividends -_ 2017 2016 1.35 2015 1.35 2014 1.35 2013 1.25

Answer & Explanation Solved by verified expert

See Answer