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 as follows?
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 million
Trevor Co.
Year 1 $ 900,000
Year 2 1,200,000
Year 3 850,000
Year 4 1,350,000
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
You might also like to view...
A company should report per share amounts for income before extraordinary items, but not for income from continuing operations
a. true b. false
An agent who has negligently or intentionally failed to perform his express duties is liable under tort law
Indicate whether the statement is true or false