Earnings for carlson cargo

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Reference no: EM131083704

The earnings for Carlson Cargo, have been predicted for the next five years and are listed below.  There are 1 million shares outstanding.  Determine the yearly dividend per share to be paid if the following policies are enacted:

a) Constant dividend payout ratio of 40%.

b) Stable dollar dividend targeted at 40% of the earnings over the five-year period.

c) Small, regular dividend of $0.50 per share plus a year-end extra when the profits in any year exceed $1,500,000.  The year-end extra dividend will equal 50% of profits exceeding $1,500,000.

d) Which method would you recommend? Briefly explain your answer

e) If Carlson Cargo operated under a dividend imputation system, why might a residual dividend policy not be a good policy?


Profits After Tax

1

$1,500,000

2

2,000,000

3

1,750,000

4

950,000

5

2,500,000

Reference no: EM131083704

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