Reference no: EM131102966
In 2004 the Keenan Company paid dividends totaling $3,600,000 on net income of $10.8 million. 2004 was a normal year, and for the past 10 years, earnings have grown at a constant rate of 10 percent. However, in 2005, earnings are expected to jump to $14.4 million, and the firm expects to have profitable investment opportunities of $8.4 million. It is predicted that Keenan will not be able to maintain the 2005 level of earnings growth-the high 2005 earnings level is attributable to an exceptionally profitable new product line introduced that year-and the company will return to its previous 10 percent growth rate. Keenan's target debt ratio is 40 percent.
a. Calculate Keenan's total dividends for 2005 if it follows each of the following policies:
(1) Its 2005 dividend payment is set to force dividends to grow at the long run growth rate in earnings.
(2) It continues the 2004 dividend payout ratio.
(3) It uses a pure residual policy with all distributions in the form of dividends(40 percent of the $8.4 million investment is financed with debt).
(4) It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy.
b. Which of the preceding policies would you recommend? Restrict your choices to the ones listed, but justify your answer.
c. Does a 2005 dividend of $9,000,000 seem reasonable in view of your answers to parts a and b? If not, should the dividend be higher or lower?
Honeycomb is a public sector biological research laboratory
: Honeycomb is a public sector biological research laboratory in UK. Its objective is to apply the latest scientific research to the development of new drugs. After a new drug is developed, Honeycomb may either produce the drug itself or license it t..
|
Analyze the productivity levels of two management approaches
: Analyze the productivity levels of the 2 management approaches, and decide which is superior. Include the SPSS output, which validates your conclusion.
|
How much did he invest at each rate
: Nico is saving money for his college education. He invests some money at 7%, and $1500 less than that amount at 6%. The investments produced a total of $235 interest in 1 yr. How much did he invest at each rate?
|
What is the mass of the water
: 1. What is the mass of the water? 2. What is the mass of the salt in your solution? 3. After the evaporation, your solution lost 100 g of mass. How much salt (NaCl) is left in the solution?
|
Calculate keenan''s total dividends for 2005
: Calculate Keenan's total dividends for 2005 if it follows each of the following policies: Which of the preceding policies would you recommend? Restrict your choices to the ones listed, but justify your answer. Does a 2005 dividend of $9,000,000 seem ..
|
Discuss the single most interesting or surprising thing
: Create a metaphor or analogy that captures the essence of the major lessons learned in the BBA program (e.g., business administration is like . . .).
|
Continental us varies according to the airlines
: The cost of taking your pet aboard the air flight with you in the continental US varies according to the airlines. The five number summary for prices based on a sample of major US airlines was:
|
What would need to happen for you to reach your potential
: What responsibilities or challenges could you undertake that would support your growth and development? What skills could you learn to ensure you are better equipped to do what you would like to do?
|
Estimate the peak deviation and the bandwidth of modulator
: Estimate the peak deviation and the bandwidth of the modulator output,
|