The Gar~ngton O>rporation expects next year's net income to be $ 15 mHo ~on. The Grm's debt/as sets ratio cu rrently is 40 perce nt Garlington has $12 mH~on of proGtable invesbnent opportuniti es. and it wishes to maintain existing debt ratio. According to the residual di,;dend policy. how large should Garlington 's dividend pa)'OUtratio be next )"'a
The Gar~ngton O>rporation expects next year's net income to be $ 15 mHo ~on. The Grm's debt/as sets ratio cu rrently is 40 perce nt Garlington has $12 mH~on of proGtable invesbnent opportuniti es. and it wishes to maintain existing debt ratio. According to the residual di,;dend policy. how large should Garlington 's dividend pa)'OUtratio be next )"'a
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
The Gar~ngton O>rporation expects next year's net income to be $ 15 mHo
~on. The Grm's debt/as sets ratio cu rrently is 40 perce nt Garlington has
$12 mH~on of proGtable invesbnent opportuniti es. and it wishes to maintain
existing debt ratio. According to the residual di,;dend policy. how large
should Garlington 's dividend pa)'OUtratio be next )"'ar
Expert Solution
Step 1: Define=residual policy
In the dividend residual policy dividends are paid after making allocation for capital expenditure and after that all income is distributed as a dividend.
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