Green Caterpillar Garden Supplies Inc. reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 7%. Green Caterpillar expects to maintain its current profit margin of 24% and dividend payout ratio of 10%. The following information was taken from Green Caterpillar’s balance sheet: Total assets: $425,000 Accounts payable: $70,000 Notes payable: $35,000 Accrued liabilities: $60,000 Based on the AFN equation, the firm’s AFN for the current year is Because of its excess funds, Green Caterpillar Garden Supplies Inc. is thinking about raising its dividend payout ratio to satisfy shareholders. Green Caterpillar could pay out of its earnings to shareholders without needing to raise any external capital.(
Green Caterpillar Garden Supplies Inc. reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 7%. Green Caterpillar expects to maintain its current profit margin of 24% and dividend payout ratio of 10%. The following information was taken from Green Caterpillar’s balance sheet: Total assets: $425,000 Accounts payable: $70,000 Notes payable: $35,000 Accrued liabilities: $60,000 Based on the AFN equation, the firm’s AFN for the current year is Because of its excess funds, Green Caterpillar Garden Supplies Inc. is thinking about raising its dividend payout ratio to satisfy shareholders. Green Caterpillar could pay out of its earnings to shareholders without needing to raise any external capital.(
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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Green Caterpillar Garden Supplies Inc. reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 7%. Green Caterpillar expects to maintain its current profit margin of 24% and dividend payout ratio of 10%. The following information was taken from Green Caterpillar’s balance sheet:
| Total assets: | $425,000 |
| Accounts payable: | $70,000 |
| Notes payable: | $35,000 |
| Accrued liabilities: | $60,000 |
Based on the AFN equation, the firm’s AFN for the current year is
Because of its excess funds, Green Caterpillar Garden Supplies Inc. is thinking about raising its dividend payout ratio to satisfy shareholders. Green Caterpillar could pay out of its earnings to shareholders without needing to raise any external capital.(Hint: What can Green Caterpillar increase its dividend payout ratio to before the AFN becomes positive?)
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