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(dividend policies) 1 answer below » 13-1. ( Dividend policies ) Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared
for the CFO of the company and are shown in the following table. The firm has 7,500,000 shares of common stock outstanding. As assistant to the CFO, you are
asked to determine the yearly dividend per share to be paid depending on the following possible policies: a. A stable dollar dividend targeted at 40 percent of earnings over a 5-year
period b. A small, regular dividend of $0.60 per share plus a year-end extra when the
profits in any year exceed $20 View complete question » 13-1. ( Dividend policies ) Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared
for the CFO of the company and are shown in the following table. The firm has 7,500,000 shares of common stock outstanding. As assistant to the CFO, you are
asked to determine the yearly dividend per share to be paid depending on the following possible policies: a. A stable dollar dividend targeted at 40 percent of earnings over a 5-year
period b. A small, regular dividend of $0.60 per share plus a year-end extra when the
profits in any year exceed $20,000,000. The year-end extra dividend will equal 50 percent of profits exceeding $20,000,000. c. A constant dividend payout ratio of 40 percent YEAR PROFITS AFTER TAXES 1 $ 18,000,000 2 21,000,000 3 19,000,000 4 23,000,000 5 25,000,000 PROBLEM 13-1 DIVIDEND POLICIES DATA Profits after Year Taxes 1 18,000,000 2 21,000,000 3 19,000,000 4 23,000,000 5 25,000,000 106,000,000 Outstanding 7,500,000 Div payout ratio 40% Stable div/Earn 40% over next 5 years Regular div 0.60 Year-end extra when profits exceed 20,000,000 % of profits 50% A) Target Dividend = B) Small, regular div plus year-end extra: C) Constant Payout Ratio: Year 1 Year 2 Year 3 Year 4 Year 5 (Please use excel to solve) View less » Jan 10 2014 05:38 PM
