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1) Bill’s Development Company follows residual dividend policy. For next year, firm expects to have internally generated funds of= $10,000 (it is not a very big company). Firm has 500 shares issued and outstanding and the tax rate of= 40%. Next year, Bill’s Development Company has profitable investment opportunities of= $20,000. Firm sustains a target capital structure which incorporates a debt-to-equity of 1.5.

a) Compute the cash dividends per share that company will state to be paid to shareholders?

b) If profitable investment opportunities for next year are $25,000, determine the cash dividends per share that company will state to be paid to shareholders?

c) If profitable investment opportunities for next year are= $15,000, find out the cash dividends per share that company will state to be paid to shareholders?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914813

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