CAMZ Co.'s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding common stock, what will be the yearly dividend per share be if the dividend policy is as follows: a. A constant payout ratio of 40% b. A stable peso dividend targeted at 40% of the average earnings over the four year period.   Projected annual earnings: 1st year P900,000 2nd year 1,200,000 3rd year 850,000 4th year 1,350,000

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
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CAMZ Co.'s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding common stock, what will be the yearly dividend per share be if the dividend policy is as follows:

a. A constant payout ratio of 40%

b. A stable peso dividend targeted at 40% of the average earnings over the four year period.

 

Projected annual earnings:

1st year P900,000
2nd year 1,200,000
3rd year 850,000
4th year 1,350,000

 

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Assuming there are 500,000 shares outstanding common stock, what will be the yearly dividend per share be if the dividend policy is:

An annual investment requirement of P1.8 million is to be funded. Capital structure is 60% debt and 40% equity. Residual Dividend policy is establised.

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Follow-up Question

Assuming there are 500,000 shares outstanding common stock, what will be the yearly dividend per share be if the dividend policy is as follows:

a. Small regular dividend of P0.75 plus a year-end extra of 40% of the profits exceeding P1million.

b. An annual investment requirement of P1.8 million  is to be funded. Capital structure is 50% debt and 50% equity. Residual Dividend policy is establised.

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