Ortinau's Office Products and Supplies (OOPS) follows the constant payout ratio dividend policy by paying out 40 percent of earnings each year. This year, OOPS expects the dividend payment to be 7 percent higher than last year's payment, which was $130,000. a) What is the amount of net income that OOPS expects to generate this year? b) If its target capital structure calls for 50 percent common equity, what will be the total funds the company can invest in capital budgeting projects this year before new common stock must be issued to raise new funds?

Ortinau's Office Products and Supplies (OOPS) follows the constant payout ratio dividend policy by paying out 40 percent of earnings each year. This year, OOPS expects the dividend payment to be 7 percent higher than last year's payment, which was $130,000. a) What is the amount of net income that OOPS expects to generate this year? b) If its target capital structure calls for 50 percent common equity, what will be the total funds the company can invest in capital budgeting projects this year before new common stock must be issued to raise new funds?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

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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?
The Wei Corporation expects next year's net income to be $10 million. The firm is currently financed with 40% debt. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei's dividend payout ratio be next year? Round your answer to two decimal places.
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