Problemabc firm has a debt to equity ratio of 23 and new, Ask an Expert

Accounting

Problem:

ABC firm has a debt to equity ratio of 2.3 and new investments would cost $35 million this year. The firm expects earnings of $12 million this year.

Required:

Question 1: Calculate the dividends paid and external financing required if the firm follows a residual dividend policy.

Question 2: Calculate the dividends paid and external financing required if the firm has a fixed payout ratio of 25%.

Note: Please show how to work it out.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166148

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