Chapter 15, Problem 11P

a)

Summary Introduction

To determine: Amount of retained earnings needed by company K to fund its capital budget.

b)

Summary Introduction

To determine: Dividend per share (DPS) and pay-out ratio.

c)

Summary Introduction

To determine: Amount of retained earnings needed by company K to fund its capital budget, if it maintains $2 DPS for next year.

d)

Summary Introduction

To determine: Whether company maintains its present capital structure with its DPS and maintain $15 million capital budget without raising new common stock.

e)

Summary Introduction

To determine: Portion of current year capital budget could have to be financed by debt.

f)

Summary Introduction

To determine: External (new) equity needed.

g)

Summary Introduction

To determine: Company’s capital budget for next year.

h)

Summary Introduction

To determine: Actions taken by company when its forecasted retained earnings are fewer than retained earnings required.