In 2021, the Lissa Company paid dividends of $10 on after-tax income (cash flow) of$25. Capital budget projects totaled $15 in 2013. 2021 was a normal year forearnings, dividends, and capital budgets. For the past 12 years, earnings have grownat a constant rate of 8%. However, in 2022, earnings are expected to fall to $20 andthe firm expects to have profitable investment opportunities will grow to 18. It ispredicted that Lissa will not maintain the 2022 level of earnings growth, and thecompany will return to the 2021 earnings ($25) and growth rate (8%) in 2023. Lissa'starget market value leverage ratio is 50% and it is at the target.a. Calculate Lissa's total dividends for 2022 if its dividend payment is set to forcedividends to grow at the long-run growth rate in earnings.b. Calculate Lissa's total dividends for 2022 if it continues its 2013 dividend payoutratio.c. Calculate Lissa's total dividends for 2022 if it uses a pure residual dividend.d.Choosing only among Choices A, B and C, what is Lissa's optimalDividend Policy? Why is your answer correct, you must use numbers in this answerto receive credit.

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Description: In 2021, the Lissa Company paid dividends of $10 on after-tax income (cash flow) of$25. Capital budget projects totaled $15 in 2013. 2021 was a normal year forearnings, dividends, and capital budgets. For the past 12 years, earnings have grownat a c

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a. Calculate Lissa's total dividends for 2022 if its dividend payment is set to force dividends to grow at the long-run growth rate in earnings. b. Calculate Lissa's total dividends for 2022 if it continues its 2013 dividend payout ratio. c. Calculate Lissa's total dividends for 2022 if it uses a pure residual dividend. d. Choosing only among Choices A, B and C, what is Lissa's optimal Dividend Policy? Why is your answer correct, you must use numbers in this answer to receive credit.

a. Calculate Lissa's total dividends for 2022 if its dividend payment is set to force dividends to grow at the long-run growth rate in earnings. b. Calculate Lissa's total dividends for 2022 if it continues its 2013 dividend payout ratio. c. Calculate Lissa's total dividends for 2022 if it uses a pure residual dividend. d. Choosing only among Choices A, B and C, what is Lissa's optimal Dividend Policy? Why is your answer correct, you must use numbers in this answer to receive credit.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 7P

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