Reference no: EM13823106
Use the following information for Questions 1 and 2:
Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. This one - time unusual earnings growth won't be maintained, though, and after 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt ratio is 35%.
Calculate Boehm's total dividends for 2014 under each of the following policies:
1. (a) Its 2014 dividend payment is set to force dividends to grow at the long - run growth rate in earnings.
(b) It continues the 2013 dividend payout ratio.
2. (a) It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt).
(b) 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.
Use the following information for Questions 3 and 4:
Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm's assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 16%, and it uses no debt.
3. What is the incremental profit? To get a rough idea of the project's profitability, what is the project's expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the investment? Why or why not?
4. Would the firm's break-even point increase or decrease if it made the change?
|
Countries that are similar in terms of power distance
: Please identify five countries that are similar in terms of Power Distance. Please summarize in your own words why they are similar. Please identify five countries that are similar in terms of Individualism. Please summarize in your own words why the..
|
|
What is the clinics contribution margin on the contract
: Grandview Clinic has fixed costs of $2million and an average variables cost rate of $15 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates the population serv..
|
|
Inspection service and operating costs
: The last respondent did not give a complete answer. This question in in regards to an inspection service and their operating costs. What is needed: Draw a graph illustrating the total costs under this plan using the information below. Label the axes ..
|
|
Define power distance in one sentence
: Please define Power Distance in one sentence and summarize the differences (if any) in Power Distance among Russia, Venezuala, Japan and Bhutan. Please define Individualism in one sentence and summarize the differences (if any) in Individualism among..
|
|
Would the firms break even point increase or decrease
: FIN 534 What is the incremental profit? To get a rough idea of the project's profitability, what is the project's expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the invest..
|
|
What are the potential penalties for violating the esa
: What are the potential penalties for violating the ESA? Describe the property that you chose, and explain why you chose it.
|
|
Journalize the entry to record the issuance of instalment
: On the first day of the fiscal year, a company issues $80,000, 7%, seven-year instalment notes that have annual payments of $14,844. The first note payment consists of $5,600 of interest and $9,244 of principal repayment. Journalize the entry to reco..
|
|
Discusses the controversies associated with consumers
: Discusses the controversies associated with requiring consumers to pay for plastic and paper bags at their supermarkets and other stores. Advocates of the consumer pay system argue that bags are harmful to the environment and that under this syste..
|
|
The AICPA has the authority to set standards and make rules
: The AICPA has the authority to set standards and make rules in all the following areas EXCEPT:
|