This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, wouldlike to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows.YearEarnings after tax ($ millions)Capital investment ($ millions)Target book value debt-to-equity ratio (%)Dividend payout ratio (%)Marketable securities ($ millions)(Year marketable securities = $220 million)YearDividends (millions)Divident Payout ratio (%)11100170120?22022110($ millions)3300120?220a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and whilemaintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remembersources 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.31504300120?2204200352120?22053005450120?220

The dividend payout ratio refers to the amount that is paid as dividends to the shareholders in…

Answered: This is a more difficult but…

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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Neil Young Brothers maintains a constant debt-equity ratio. There are 50,000 shares of stock outstanding at a market price of $24.50 a share. There are 2,500 bonds outstanding selling for $980. Projected earnings for next year are estimated at $600,000. The managers expect to make $450,000 investments in new projects in the coming year. How much debt financing will the firm need next year if it follows a residual dividend policy?Question 2 options: $300,000 $450,000 $500,000 $600,000 $0
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: Stock return 2014 2015 2016 2017 5.00% 3.40% 6.00% 8.40% 2018 2.60% Given the preceding data, the average realized return on CCC's stock is The preceding data series represents historical returns is of CCC's hist If investors expect the average realized return from 2014 to 2018 on C 15.75% 10.16% 5.08% 12.70% ns. Based on this conclusion, the standard deviation of CCC's o continue into the…
Use the following inputs and the finite horizon from of the residual income model to compute the value of Southern Trust Bank (STB) shares as of 31 December 2007: i. ROE will continue at 15% for the next five years and 10% thereafter with all earnings reinvested (no dividends paid) ii. Cost of equity is 10% iii. Beginning period book value at year-end 2007 is $10
-) Company B's current equity beta, debt beta, and cost of equity are 1.6, 1.0 and 12 percent, respectively. The current (and expected future) tax rate and risk-free rate are 35 percent and 4 percent, respectively. Company B currently has a net debt- to-equity ratio of 50 percent. The company plans to increase its net debt-to-equity ratio to 100 percent (leaving its debt beta unchanged). After this increase in leverage, company B's cost of equity will be
Hello, How do I solve this corporate finance problem without using excel? Thanks
Talsa, Inc., an all-equity firm, operates in the growing electric vehicle market. Over the next three years (T 1,2,3). Talsa, Inc., is expected to generate FCF of $2.4 billion, $3.6 billion, and $5.0 billion. After Year 3, FCF is expected to grow at a constant rate of 3.0 percent per year, resulting in an Exit Value of $57.22 billion. Talsa has 500 million shares outstanding. What is Talsa's intrinsic price/share based on a FCF valuation of the firm? O $89.74 O $101.33 O $98.60 Ⓒ$95.55 FOR OA
you have developed the following pro forma income statement for your? corporation: it represents the most recent? year’s operations, which ended yesterday. a.if sales should increase by 25 ?percent, by what percent would earnings before interest and taxes and net income? increase? b.if sales should decrease by 25 ?percent, by what percent would earnings before interest and taxes and net income? decrease? q c.if the firm were to reduce its reliance on debt financing such that interest expense were cut in? half, how would this affect your answers to parts a and b?? sales $ 45,750,000 variable costs -22,800,000 revenue before fixed costs $ 22,950,000 fixed costs -9,200,000 ebit $ 13,750,000 interest expense -1,350,000 earnings before taxes $ 12,400,000 taxes (50%) -6,200,000 net income $ 6,200,000

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