What payout ratio does your answer to part a simply

Assignment Help Financial Accounting
Reference no: EM13971185

1. ABC has an all-common-equity capital structure. It has 200,000 shares outstanding at a par of $2. Growth expectations recently have been lowered. Previously, it plowed back most of its earnings which earned 12% per year. The future growth rate will be 5% and dividends would increase. New investments that would earn a required 14% would amount to $800,000 in 2006; net income would be $2 million. If a 20% payout were continued, retained earnings would be $1.6million 2006. High earnings from existing assets are expected to continue. 

(a) Assuming that the acceptable 2006 projects would be financed by retained earnings during the year, Calculate DPS for 2006. 

(b) What payout ratio does your answer to part a simply for 2006? 

(c) If a 60% payout ratio is continued, what is your estimate of the present market price of the common stock? 

Reference no: EM13971185

Questions Cloud

Capital budegeting cash flows : The present value of the cash flows dictates the manager's decision. Are cash flows that are estimated in lease analysis more or less risky than capital budegeting cash flows?
Describe in what way your proposed business action : Describe in what way your proposed business action is an innovative idea - Create a vision of your idea that explains the value to the company.
Present-value factor and the annuity present-value factor : Your task this week is to teach Grammy and the board the time value of money and its related concepts. She would like you to address several specific questions to demonstrate the use of time value of money techniques. What is the relationship between..
Owner of college connection : Assume that you are the owner of College Connection, which specializes in items that interest students. At the end of January 2011, you find (for January only) this information:
What payout ratio does your answer to part a simply : Assuming that the acceptable 2006 projects would be financed by retained earnings during the year, Calculate DPS for 2006.
Expansion project-what is projects year zero net cash flow : Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.43 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to g..
Problem regarding the present value of loan : a. How much could this loan be sold for to another bank if loans of similar quality carried an 8.5 percent interest rate? That is, what would be the present value of this loan? b. Now, if interest rates on other similar quality loans are 10 percent..
Firm net capital spending : The 2014 income statement showed an interest expense of $94,500 and the company paid out $146,000 in cash dividends during 2014. The firm's net capital spending for 2010 was $970,000, and the firm reduced its net working capital investment by $126..
Calculate the free cash flow generated : Ajax Ltd reported Net Income of $435m in 2013, after providing for $186m in tax at a rate of 30%. Interest Expense was $56m and Depreciation was $32m. Calculate the free cash flow generated by Ajax Ltd in 2013.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Question michael porters five forces model is a required

question michael porters five forces model is a required tool to aid organizations facing the challenging decision of

  Financial position postion and statement of activities

Exhiibits 14-8 and 14-9 presents the statement of financial position postion and statement of activities and statements of activities for the disabled veterans (Day) charitable Service Trust. For both 2007 and 2006, calculate:common size ration..

  Explain service revenue unrecorded in august

Calvin and Hobbes are the new owners of Micro Computer Services. At the end of August 2010, their first month of ownership, Calvin and Hobbes are trying to prepare monthly financial statements. They have the following information for the month.

  Explain capture theory in your own words

Explain capture theory in your own words. Predict, from the perspective of capture theory, who may ultimately benefit from the introduction of such regulation.

  Standard factory overhead variance report

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012. The company expected to operate the department at 100% of normal capacity of 7,000 hours. Pre..

  Stock is cumulative and nonparticipation

In each of the following independent cases, it is assumed that the corporation has $400,000 of 6% preferred stocks and $1,600,000 of common stock outstanding, each having a par value of $10. As of 12/31/11, it is desired to distribute $250,000 in div..

  Fred constitutional rights

1. Fred calls an off duty police officer a clown. Bill, the police officer objects and decides to get even with Fred. The next day while on duty, Bill enters the back door of Fred's house and finds crack cocaine in his bedroom. Fred's Constitution..

  Determine annual and total depreciation recorded by company

Reimer Company and Lingo Company are two proprietorships that are similar in many respects. Determine the annual and total depreciation recorded by each company during the 3 years.

  Gasson company uses the weighted

The Gasson Company uses the weighted-average method in its process costing system. The company's ending work in process inventory consists of 11,000 units,

  Calculate the amount of bond discount or premium

calculate the amount of bond discount or premium, if any. (Do not round your intermediate calculations and round your final answers to whole dollar amount. Omit the "$" sign in your response.)

  In month of may lopat company inc wrote checks in the

in month of may lopat company inc. wrote checks in the amount of 37000. in june checks in amount of 50632 were written.

  Inventory from its suppliers on credit terms

VIM Company purchased $100,000 in inventory from its suppliers on credit terms. The company's acid-test ratio would most likely   a. Increase   b. Decrease   c. Be unchanged   d. Impossible to determine without more information

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