Problem 6-11 This is a more difficult but Informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows. a. According to this forecast, what dividends will the company be able to distribute annually without ralsing new equity and while maintaining a balance of $200 million In marketable securitles? What will the annual dividend payout ratlo be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratlo % to the nearest ones place. Problem 6-11 This is a more difficult but Informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible. would like to finance its growth without selling new equity. Selected Information from the company's five-year financial forecast follows. Year Earnings after tax ($ millions) Capital investment ($ millions) Target book value debt-to-equity ratio (%) Dividend payout ratio (%) Marketable securities ($ millions) (Year marketable securities = $200 million) 1 2 3 5 100 118 158 212 300 180 300 300 360 490 130 130 130 130 130 ? ? ? ? ? 200 200 200 200 200 a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $200 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place. Year Dividends (millions) Divident Payout ratio (%) ($ millions) 2 3 22 5 86
Problem 6-11 This is a more difficult but Informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows. a. According to this forecast, what dividends will the company be able to distribute annually without ralsing new equity and while maintaining a balance of $200 million In marketable securitles? What will the annual dividend payout ratlo be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratlo % to the nearest ones place. Problem 6-11 This is a more difficult but Informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible. would like to finance its growth without selling new equity. Selected Information from the company's five-year financial forecast follows. Year Earnings after tax ($ millions) Capital investment ($ millions) Target book value debt-to-equity ratio (%) Dividend payout ratio (%) Marketable securities ($ millions) (Year marketable securities = $200 million) 1 2 3 5 100 118 158 212 300 180 300 300 360 490 130 130 130 130 130 ? ? ? ? ? 200 200 200 200 200 a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $200 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place. Year Dividends (millions) Divident Payout ratio (%) ($ millions) 2 3 22 5 86
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 6-11 This is a more difficult but Informative problem. James Brodrick & Sons, Incorporated, is growing rapidly
and, if at all possible, would like to finance its growth without selling new equity. Selected information from the
company's five-year financial forecast follows. a. According to this forecast, what dividends will the company be able to
distribute annually without ralsing new equity and while maintaining a balance of $200 million In marketable securitles?
What will the annual dividend payout ratlo be? (Hint: Remember sources of cash must equal uses at all times.) Note:
Round dividends to the nearest million dollars and the payout ratlo % to the nearest ones place.
Problem 6-11
This is a more difficult but Informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible.
would like to finance its growth without selling new equity. Selected Information from the company's five-year financial forecast
follows.
Year
Earnings after tax ($ millions)
Capital investment ($ millions)
Target book value debt-to-equity ratio (%)
Dividend payout ratio (%)
Marketable securities ($ millions)
(Year marketable securities = $200 million)
1
2
3
5
100
118
158
212
300
180
300
300
360
490
130
130
130
130
130
?
?
?
?
?
200
200
200
200
200
a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and
while maintaining a balance of $200 million in marketable securities? What will the annual dividend payout ratio be? (Hint:
Remember sources of cash must equal uses at all times.)
Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place.
Year
Dividends (millions)
Divident Payout ratio (%)
($ millions)
2
3
22
5
86
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