residual div policy Article

п»їAllarco Inc. anticipates that profits in the approaching year will probably be $90, 1000, 000. There are 20, 1000, 000 shares and Allarco Inc. maintains a debt-equity rate of six. 50.

a) Calculate the utmost investment money available without issuing new equity. В The correct answer was: В $675, 000, 500. 00

To reinvest the whole earnings with no equity funding and to maintain the debt-equity ratio the same, the most funds readily available is $90, 000, 000 + (6. 50 Г— $90, 500, 000) = $675, 000, 000

b) What will become the increase in borrowing to achieve the above purchase funds? В The correct answer was: В $585, 000, 500. 00

To hold the debt-equity ratio a similar, the new credit should be $675, 000, 1000 - $90, 000, 500 = $585, 000, 1000

c) Suppose the firm uses left over policy. Organized capital bills total $45, 000, 1000. Based on this information, what will the dividend every share always be? В The proper answer was: В $4. 20 share

D/E = 6th. 50 suggests capital structure is (2/15) equity and (13/15) debtВ Equity area of investment prepare = (2/15) Г— $45, 000, 500 = $6, 000, 000. Residual = $90, 000, 000 - $6, 000, 000 sama dengan $84, 500, 000 Gross per reveal = $84, 000, 000/20, 000, 500 share(s) = $4. 20 per reveal

d) Partly (c), simply how much borrowing will be held at? В

The proper answer was: В $39, 000, 000. 00

To keep the debt-equity ratio the same, the modern borrowing should be $45, 500, 000 -- $6, 1000, 000 sama dengan $39, 000, 000

e) In part (c), What is the addition to retained earnings? В The correct response was: В $6, 000, 500. 00

The overall dividend can be $90, 1000, 000 -- (2/15) Г— $45, 500, 000 = $84, 500, 000 Conjunction with retained revenue = $90, 000, 1000 - $84, 000, 500 = $6, 000, 1000

f) Imagine Allarco Incorporation. plans not any capital outlays for the coming year. What will the dividend per share be under a left over policy? В The correct answer was: В $4. 50 every share

Since there's no capital outlay to get the coming year, the total dividend can be $90, 500, 000. The dividend per share can be $90, 000, 000/20, 1000, 000 share(s) = $4. 50 per share

g) In part (f), what will new...



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