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

  Service provides transportation services

Cindy limo service provides transportation services in and around middle like. its profits have been declining and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. the total cost will..

  Identifying all adjustments and accrued expenses

Identifying all adjustments and Accrued Expenses/Prepaid Expenses Other entries

  How much should it report as foreign exchange loss

When Post collected the receivable on February 15, 2012, the U.S. dollar equivalent was $95,000. In Post's 2012 consolidated income statement, how much should it report as a foreign exchange loss?

  Calculate the profit made on the given transaction

On 1 May the Sea Traders Company purchased 200 spare parts for fishing boats, costing £20 each. Calculate the profit made on this transaction. Explain the impact of each transaction on the accounting equation.

  Prepare the stockholders equity section of the kcas-tv

Prepare the stockholders' equity section of the KCAS-TV balance sheet at September 30, 2012.

  The total fixed operating costs per month

Using the high-low method, estimate - The variable cost per occupied bed on a daily basis and the total fixed operating costs per month.

  Total amount of the current liability

The total amount of the current liability including interest payable for this loan that appears in Select Company's balance sheet at December

  The company has a workforce of both hourly

Olney Company is a small manufacturing firm located in Allentown, Pennsylvania. The company has a workforce of both hourly and salaried employees. Each employee is paid for hours actually worked during each week, with the time worked being recorded i..

  How many calls were made there

A new branch in its first year opened new accounts at a rate of 40 for every 100 customer calls. The total num?if the bank opens 10,000, how many calls were made?

  Journalizing and posting

On January 7, 2016, Captec Company purchased $4,175 of supplies on account. In Captec Company’s chart of accounts, the supplies account is No. 15, and the accounts payable account is No. 21. Prepare a four-column account for Supplies. Enter a debit b..

  Set out below are the sales and net profits of a business

set out below are the sales and net profits of a business for two years 2010 and 2011nbsp2010pound2011poundsales

  What is its average and marginal cost

what is its average and marginal cost? kilowatt-hour for the first 10000 units each month

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