The Hastings Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the stockholders could earn if the funds were paid out in the form of dividends. Profitable Capital Expenditure Year 1 Net Income $11 million $ 8 million 2 24 million 3 9 million 11 million 7 million 4 19 million 7 million 5 23 million 8 million The Hastings Corporation has 2 million shares outstanding (The following questions are separate from each other). a. If the marginal principle of retained earnings is applied, how much in total cash dividends will be paid over the five years? (Enter your answer in millions.) Total cash dividends million b. If the firm simply uses a payout ratio of 40 percent of net income, how much in total cash dividends will be paid? (Enter your answer in millions and round your answer to 1 decimal place.) Total cash dividends million c. If the firm pays a 10 percent stock dividend in years 2 through 5, and also pays a cash dividend of $3.40 per share for each of the five years, how much in total dividends will be paid? Total cash dividends d. Assume the payout ratio in each year is to be 20 percent of net income and the firm will pay a 10 percent stock dividend in years 2 through 5. How much will dividends per share for each year be? (Assume cash dividend is paid after the stock dividend). (Round your answers to 2 decimal places.) Dividends per Year Share 1 2 3 4 5
The Hastings Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the stockholders could earn if the funds were paid out in the form of dividends. Profitable Capital Expenditure Year 1 Net Income $11 million $ 8 million 2 24 million 3 9 million 11 million 7 million 4 19 million 7 million 5 23 million 8 million The Hastings Corporation has 2 million shares outstanding (The following questions are separate from each other). a. If the marginal principle of retained earnings is applied, how much in total cash dividends will be paid over the five years? (Enter your answer in millions.) Total cash dividends million b. If the firm simply uses a payout ratio of 40 percent of net income, how much in total cash dividends will be paid? (Enter your answer in millions and round your answer to 1 decimal place.) Total cash dividends million c. If the firm pays a 10 percent stock dividend in years 2 through 5, and also pays a cash dividend of $3.40 per share for each of the five years, how much in total dividends will be paid? Total cash dividends d. Assume the payout ratio in each year is to be 20 percent of net income and the firm will pay a 10 percent stock dividend in years 2 through 5. How much will dividends per share for each year be? (Assume cash dividend is paid after the stock dividend). (Round your answers to 2 decimal places.) Dividends per Year Share 1 2 3 4 5
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
Related questions
Question
Transcribed Image Text:The Hastings Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the
stockholders could earn if the funds were paid out in the form of dividends.
Profitable Capital
Expenditure
Year
1
Net Income
$11 million
$ 8 million
2
24 million
3
9 million
11 million
7 million
4
19 million
7 million
5
23 million
8 million
The Hastings Corporation has 2 million shares outstanding (The following questions are separate from each other).
a. If the marginal principle of retained earnings is applied, how much in total cash dividends will be paid over the five years? (Enter your answer in millions.)
Total cash dividends
million
b. If the firm simply uses a payout ratio of 40 percent of net income, how much in total cash dividends will be paid? (Enter your answer in millions and round your answer to 1
decimal place.)
Total cash dividends
million
Transcribed Image Text:c. If the firm pays a 10 percent stock dividend in years 2 through 5, and also pays a cash dividend of $3.40 per share for each of the five years, how much in total dividends will be paid?
Total cash dividends
d. Assume the payout ratio in each year is to be 20 percent of net income and the firm will pay a 10 percent stock dividend in years 2 through 5. How much will dividends per share for
each year be? (Assume cash dividend is paid after the stock dividend). (Round your answers to 2 decimal places.)
Dividends per
Year
Share
1
2
3
4
5
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education