Berjaya Berhad had total earnings last year of RM5,000,000 but expect total earnings to drop toRM4,750,000 this year because of a slump in the housing industry. There are currently 1,000,000shares of common stock outstanding. The company has RM4,000,000 worth of investment toundertake this year. The company finances 40 % of its investments with debt and 60 % with equitycapital. The company paid RM3.00 per share dividend last year. a) If the company follows a pure residual dividend policy, how large the dividend per share willeach shareholder receive this year? b) If the company maintains a constant dividend payout ratio each year, how large the dividendper share will each shareholder receive this year? c) If the company follows a constant dollar dividend policy, how large the dividend per share willeach shareholder receive this year?
Berjaya Berhad had total earnings last year of RM5,000,000 but expect total earnings to drop to
RM4,750,000 this year because of a slump in the housing industry. There are currently 1,000,000
shares of common stock outstanding. The company has RM4,000,000 worth of investment to
undertake this year. The company finances 40 % of its investments with debt and 60 % with equity
capital. The company paid RM3.00 per share dividend last year.
a) If the company follows a pure residual dividend policy, how large the dividend per share will
each shareholder receive this year?
b) If the company maintains a constant dividend payout ratio each year, how large the dividend
per share will each shareholder receive this year?
c) If the company follows a constant dollar dividend policy, how large the dividend per share will
each shareholder receive this year?
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