4. Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure, what will its dividend payout ratio be? $2,900,000 Capital budget 10% % Debt EBIT $1,025,000 Interest rate 40% Debt outstanding Shares outstanding $5,100,000 % Equity 5,000,000 Tax rate 60% 40% a. 70.8% b. 50.8% c. 57.1% d. 71.4% e. 65.7%

4. Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure, what will its dividend payout ratio be? $2,900,000 Capital budget 10% % Debt EBIT $1,025,000 Interest rate 40% Debt outstanding Shares outstanding $5,100,000 % Equity 5,000,000 Tax rate 60% 40% a. 70.8% b. 50.8% c. 57.1% d. 71.4% e. 65.7%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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8. CB Corp. is expected to generate net income of $40 million next year and will pay $20 million in after-tax interest expense next year. The company is expected to reinvest 20% of its after-tax operating earnings and will have return on capital (ROC) equal to 10% in perpetuity. If the weighted-average cost of capital for CB Corp. is 10% what is today's present value of the firm equal to? (a) $60 million. (b) $120 million. (c) $150 million. (d) $600 million.
Charles Jones is evaluating Reliant Home Furnishings by using a three-stage growth model. He has accumulated the following information: · Current FCFF $745 million · Outstanding shares 309.39 million · Equity beta 0.90, · risk-free rate 5.04 percent; · equity risk premium 5.5 percent · Cost of debt 7.1 percent · Marginal tax rate 34 percent · Capital structure 20 percent debt, 80 percent equity · Long-term debt $1.518 billion · Growth rate of FCFF - 8.8 percent annually in stage 1, years 1–4 - 7.4 percent in year 5, - 6.0 percent in year 6, - 4.6 percent in year 7 - 3.2 percent in year 8 and thereafter From the information that Jones has accumulated, estimate the following: b) WACC. c) Total value of the fi rm.
K SIROM Scientific Solutions has $10 million of outstanding equity and $5 million of bank debt. The bank debt costs 5% per year. The estimated equity beta is 2. If the market risk premium is 8% and the risk-free rate is 5%, compute the weighted average cost of capital if the firm's tax rate is 30%. OA. 15.17% OB. 17.44% O C. 15.93% OD. 16.68% ...
The projected capital budget of Kandell Corporation is $575,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $575,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out? Select the correct answer. a. $344,887 b. $345,000 c. $344,831 d. $344,944 e. $344,774
What is the weighted average cost of capital for a corporation that finances an expansion project using 40% retained earnings and the rest as debt capital? Assume the interest rates are 13% for equity financing and 27% for debt financing. The rate of return per quarter is __ % The rate of return per year is __%
Residual Distribution Model Puckett Products is planning for $2 million in capital expenditures next year. Puckett's target capital structure consists of 55% debt and 45% equity. If net income next year is $1 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places. ___%
A firm retains earnings of $40,000. What is the total external financing needed if this company, with $120,00 O in assets, has projected a growth rate of 8 percent? Multiple Choice Zero $3,200 $30,400 $9,600 $100,00 0
Altamonte Telecommunications has a target capital structure that consist of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $2,000,000. If Altamonte reports net income of $1,100,000 end it follows a residual, dividend, payout policy, what will be its dividend payout ratio? Round your answer to two decimal places.
Company JA Prestwood had a net income of $1,000,000 this year. Next year's total capital budget is $2,600,000. If the target capital structure is 47% debt and the rest equity, what will be this year's dividend payout ratio?
A firm in the IT sector is considering how to set its dividend policy. It has a capital budget of €3,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be €3,500. If the company follows a residual dividend policy, what will be its total dividend payment and its payout ratio? Dividends = Net income – [(target equity ratio) *(total capital budget)].

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