Over the last 10 years, a firm has had the earnings per share shown in the following table: Year Earnings per share Year Earnings per share 2022 $4.65 2017 $2.58 2021 $3.78 2016 $1.17 2020 $3.12 2015 $1.31 2019 $2.82 2014 −$1.98 2018 $3.97 2013 $ a. If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2017? b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for two consecutive years, what annual dividend would the firm pay in 2017? c. If the firm's policy were to pay $0.50 per share each period except when earnings per share exceed $3.00, when an extra dividend equal to 80% of earnings beyond $3.00 would be paid, what annual dividend would the firm pay in 2017?
Over the last 10 years, a firm has had the earnings per share shown in the following table: Year Earnings per share Year Earnings per share 2022 $4.65 2017 $2.58 2021 $3.78 2016 $1.17 2020 $3.12 2015 $1.31 2019 $2.82 2014 −$1.98 2018 $3.97 2013 $ a. If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2017? b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for two consecutive years, what annual dividend would the firm pay in 2017? c. If the firm's policy were to pay $0.50 per share each period except when earnings per share exceed $3.00, when an extra dividend equal to 80% of earnings beyond $3.00 would be paid, what annual dividend would the firm pay in 2017?
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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Question
Over the last 10 years, a firm has had the earnings per share shown in the following table:
|
Year
|
|
Earnings per share
|
Year
|
|
Earnings per share
|
|
2022
|
|
$4.65
|
2017
|
|
$2.58
|
|
2021
|
|
$3.78
|
2016
|
|
$1.17
|
|
2020
|
|
$3.12
|
2015
|
|
$1.31
|
|
2019
|
|
$2.82
|
2014
|
|
−$1.98
|
|
2018
|
|
$3.97
|
2013
|
|
$
|
a. If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2017?
b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for two consecutive years, what annual dividend would the firm pay in 2017?
c. If the firm's policy were to pay $0.50 per share each period except when earnings per share exceed $3.00, when an extra dividend equal to 80% of earnings beyond $3.00 would be paid, what annual dividend would the firm pay in
2017?
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