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# Flotation costs and dividend policies

(Flotation Costs and issue size)
Your Firm needs to raise \$10 million. Assuming that flotation costs are expected to be \$15 per share, and that the market price of the stck is \$120, how many shares would have to be issued? What is the dollar size of the issue?

(Dividend policies) The earnings for Crystal Cargo Inc. has been predicted for the next 5 years and are as follows. There are 1 million shares outstanding. Determine the yearly dividend per share to be paid if the following policies are enacted:

A.) A constant dividend payout ratio of 50 percent
B.) A stable dollar dividend targeted at 50 percent of the earnings over the 5-year period
C.) A small, regular dividend of \$0.50 per share plus a year-end extra when the profits in ny year exceeds \$1,500,000. The year-end extra dividend will equal 50 percent of profits exceeding \$1,500,000.

Year Profit After Taxes
1 \$1,400,000
2 2,000,000
3 1,860,000
4 900,000
5 2,800,000

#### Solution Preview

1. The market price is \$120 and the flotation cost is \$15. This implies that shares ...

#### Solution Summary

The solution explains how to calculate the issue size and payment of dividend based on different dividen policies

\$2.19