This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would ike to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows. Year Earnings after tax ($ millions) Capital investment ($ millions) Target book value debt-to-equity ratio (%) Dividend payout ratio (%) Marketable securities ($ millions) (Year marketable securities = $220 million) 1 2 3 4 5 100 110 150 200 300 170 300 300 352 450 120 120 120 120 120 ? ? ? ? ? 220 220 220 220 220 . According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place. Year Dividends (millions) Divident Payout ratio (%) 1 23 23 ($ millions) 2 3 4 5
This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would ike to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows. Year Earnings after tax ($ millions) Capital investment ($ millions) Target book value debt-to-equity ratio (%) Dividend payout ratio (%) Marketable securities ($ millions) (Year marketable securities = $220 million) 1 2 3 4 5 100 110 150 200 300 170 300 300 352 450 120 120 120 120 120 ? ? ? ? ? 220 220 220 220 220 . According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.) Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place. Year Dividends (millions) Divident Payout ratio (%) 1 23 23 ($ millions) 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
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Question
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![This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would
like to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows.
Year
Earnings after tax ($ millions)
Capital investment ($ millions)
Target book value debt-to-equity ratio (%)
Dividend payout ratio (%)
Marketable securities ($ millions)
(Year marketable securities = $220 million)
1
2
3
4
5
100
110
150
200
300
170
300
300
352
450
120
120
120
120
120
?
?
?
?
?
220
220
220
220
220
a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while
maintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember
sources of cash must equal uses at all times.)
Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place.
Year
Dividends (millions)
Divident Payout ratio (%)
($ millions)
1
2
3
4
5
23
23](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5803bc44-123c-4a2c-91ca-349ac97e88e4%2F75fb13c5-6345-4af6-9e0d-f04f92ce9cff%2Ft5vkeb_processed.png&w=3840&q=75)
Transcribed Image Text:This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would
like to finance its growth without selling new equity. Selected information from the company's five-year financial forecast follows.
Year
Earnings after tax ($ millions)
Capital investment ($ millions)
Target book value debt-to-equity ratio (%)
Dividend payout ratio (%)
Marketable securities ($ millions)
(Year marketable securities = $220 million)
1
2
3
4
5
100
110
150
200
300
170
300
300
352
450
120
120
120
120
120
?
?
?
?
?
220
220
220
220
220
a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while
maintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember
sources of cash must equal uses at all times.)
Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place.
Year
Dividends (millions)
Divident Payout ratio (%)
($ millions)
1
2
3
4
5
23
23
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