How much external equity must delta raise? Delta Company has 100,000 sharesoutstanding and plans to pay $1.00 pershare in dividends each quarter next year.Delta has a capital budget of $700,000 fornext year and plans to maintain its presentdebt ratio of 0.30. If earnings are expectedto be $7.20 per share, how much externalequity must Delta raise?

To calculate how much external equity Delta must raise, follow these steps:Total Dividends Paid:…

Answered: Delta Company has 100,000 shares…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT’s total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million? In general terms, how would a change in investment opportunities affect the payout ratio under the residual distribution policy? What are the advantages and disadvantages of the residual policy? (Hint: Don’t neglect signaling and clientele effects.)
Epsilon Corporation will be purchasing 2,000 shares of XYZ Corporation.Last year, annual dividends was P40. Forecasted dividends is P45 for thecurrent year and P51 for the next year. After which, dividends are expectedto increase by 5% each year. Assuming XYZ provides an overall annual return of 20%, how much should Epsilon Corporation pay for these shares?
Gremlin Industries will pay a dividend of $1.65 per share this year. It is expected that this dividend will grow by 5% per year each year in the future. The current price of Gremlin's stock is $22.20 per share. What is Gremlin's equity cost of capital?
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NoGrowth Corporation currently pays a dividend of $2.00 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year? The price per share if its equity cost of capital is 15% per y ear is $_______ (Round to the nearest cent.)
A firm expects to have a net income of $8,000,000 during the next year. Its target capital structure is 50% debt and 50% equity. The company has determined that the optimal capital budget for the coming year is $6,000,000. If the firm follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is the firm's dividend payout ratio? O 28.5% O 40.0% O 50.5% O 62.5%
XYZ company's common shares are selling for P30.00 per share, and the company expects to set its next annual dividend at P1.50 per share. All future dividends are expected to grow by 6% per year, indefinitely. In addition, XYZ faces a floatation cost of 20% on new equity issues. What is the floatation-adjusted cost of equity? Express your answer in percentage.
NoGrowth Corporation currently pays a dividend of $2.08 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 14% per year? The price per share if its equity cost of capital is 14% per year is $_______ (Round to the nearest cent.)
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