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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. Year 1 2 5 Net Income $ 17 million 20 million 18 million 14 million 22 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? Note: Enter your answer in millions. Total cash dividends Profitable Capital Expenditure 58 million 11 million 7 million 7 million 9 million Total cash dividends b. If the firm simply uses a payout ratio of 20 percent of net income, how much in total cash dividends will be paid? Note: Enter your answer in millions and round your answer to 1 decimal place. mation Total cash dividends million c. If the firm pays a 20 percent stock dividend in years 2 through 5, and also pays a cash dividend of $2.40 per share for each of the five years, how much in total dividends will be paid? 35.719.680

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. Year 1 2 5 Net Income $ 17 million 20 million 18 million 14 million 22 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? Note: Enter your answer in millions. Total cash dividends Profitable Capital Expenditure 58 million 11 million 7 million 7 million 9 million Total cash dividends b. If the firm simply uses a payout ratio of 20 percent of net income, how much in total cash dividends will be paid? Note: Enter your answer in millions and round your answer to 1 decimal place. mation Total cash dividends million c. If the firm pays a 20 percent stock dividend in years 2 through 5, and also pays a cash dividend of $2.40 per share for each of the five years, how much in total dividends will be paid? 35.719.680

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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. Year 1 2 3 4 5 $ Net Income 17 million 20 million 18 million 14 million 22 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? Note: Enter your answer in millions. Total cash dividends Profitable Capital Expenditure $8 million 11 million 7 million 7 million. 9 million Total cash dividends b. If the firm simply uses a payout ratio of 20 percent of net income, how much in total cash dividends will be paid? Note: Enter your answer in millions and round your answer to 1 decimal place. million Total cash dividends million c. If the firm pays a 20 percent stock dividend in years 2 through 5, and also pays a cash dividend of $2.40 per share for each of the five years, how much in total dividends will be paid?. 35.719.680
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. Year 1 2 3 4 5 $ Net Income 17 million 20 million 18 million 14 million 22 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? Note: Enter your answer in millions. Total cash dividends Profitable Capital Expenditure $8 million 11 million 7 million 7 million. 9 million Total cash dividends b. If the firm simply uses a payout ratio of 20 percent of net income, how much in total cash dividends will be paid? Note: Enter your answer in millions and round your answer to 1 decimal place. million Total cash dividends million c. If the firm pays a 20 percent stock dividend in years 2 through 5, and also pays a cash dividend of $2.40 per share for each of the five years, how much in total dividends will be paid?. 35.719.680
d. Assume the payout ratio in each year is to be 30 percent of the net income and the firm will pay a 20 percent stock dividend in years 2 through 5, how much will dividends per share for each year be? (Assume the cash dividend is paid after the stock dividend.) Note: Round your answers to 2 decimal places. Year 1 2 3 4 6 Dividends per Share
Transcribed Image Text:d. Assume the payout ratio in each year is to be 30 percent of the net income and the firm will pay a 20 percent stock dividend in years 2 through 5, how much will dividends per share for each year be? (Assume the cash dividend is paid after the stock dividend.) Note: Round your answers to 2 decimal places. Year 1 2 3 4 6 Dividends per Share
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