The company follows a pure residual dividend policy

Assignment Help Finance Basics
Reference no: EM131097450

2. Lindsey Insurance Co. has current sales of $10 million and predicts next year's sales will grow to $14 million. Current assets are $3 million and fixed assets are $4 million. The firm's net profit margin is 7 percent after taxes. Presently, Lindsey has $900,000 in accounts payable, $1.1 million in long-term debt, and $5 million (including $2.5 million in retained earnings) in common equity. Next year, Lindsey projects that current assets will rise in direct proportion to the forecasted sales, and that fixed assets will rise by $500,000. Lindsey also plans to pay dividends of $400,000 to common shareholders.

a. What are Lindsey's total financing needs for the upcoming year?

b. Given the above information, what are Lindsey's discretionary financing needs?

3. Worthington, Inc. is planning to issue $7,500,000 in 120-day maturity notes carrying a rate of 11 percent per year. Worthington's commercial paper will be placed at a cost of $35,000. What is the effective cost of credit to Worthington?

Please answer ONE of the following:

1. Coppell Timber Company had total earnings last year of $5,000,000, but expects total earnings to drop to $4,750,000 this year because of a slump in the housing industry. There are currently 1,000,000 shares of common stock outstanding. The company has $4,000,000

worth of investments to undertake this year. The company finances 40 percent of its investments with debt and 60 percent with equity capital. The company paid $3.00 per share in dividends last year.

a.       If the company follows a pure residual dividend policy, how large a dividend will each shareholder receive this year?

b.       If the company maintains a constant dividend payout ratio each year, how large a dividend will each shareholder receive this year?

c.       If the company follows a constant dollar dividend policy, how large a dividend will each shareholder receive this year?

Reference no: EM131097450

What is crosby cost of equity capital

Crosby Industries has a debt-equity ratio of 1.5. Its WACC is 8.5 percent, and its cost of debt is 6 percent. There is no corporate tax. What is Crosby's cost of equity capi

Financial system and the essential documents

Scenario: You have recently been hired as a manager in the financial department for a local hospital. In the last few weeks, you have noticed a lack of understanding from th

What is this project internal rate of return

Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate

Relationship between economic activities and bond prices

Is there a relationship between economic activities and bond prices? Explain using real world examples. Select any global market and discuss the make of its bond market to

Relationship between required returns on debt and on equity

Deriving from the conclusion of Proposition I, what is the crux of M&M Proposition II? What is the natural relationship between the required returns on debt and on equity th

Compute the realized rate of return for investors

Six years ago, The Singleton Company sold a 20-year bond issue with a 14 percent annual coupon rate and a 9 percent call premium. Today, Singleton called the bonds. The bonds

Specific value from a normal distribution

What is the probability of observing any specific value from a normal distribution? For example, what is the probability of observing the number 1 from a normal distribution

What is the required rate of return on a stock

What is the required rate of return on a stock with a $2.50 expected dividend and a $19 price with 6% growth? What is the growth rate of the stock with a $3.00 expected divide

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd