E12-4 The Kopi lndustries board of directors contemplates a new dividend policy that would set dividends at 60 percent of earnings. The company has recently experienced the earnings per share (EPS) and dividends paid per share presented below: Year Earnings per share Dividends per share 2003 $ 1.75 $ 0.95 2004 1.95 1.2 2005 2.05 1.25 2006 2.25 1.3 Based on Kopi's historical dividend payment ratio, analyze whether a constant 60% payment ratio will benefit shareholders.
E12-4 The Kopi lndustries board of directors contemplates a new dividend policy that would set dividends at 60 percent of earnings. The company has recently experienced the earnings per share (EPS) and dividends paid per share presented below:
Year Earnings per share Dividends per share
2003 $ 1.75 $ 0.95
2004 1.95 1.2
2005 2.05 1.25
2006 2.25 1.3
Based on Kopi's historical dividend payment ratio, analyze whether a constant 60% payment ratio will benefit shareholders.
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