Purchase Solution

Dividend Smoothing and Adjustment Rate

Not what you're looking for?

Ask Custom Question

The Sharpe Co. just paid a dividend of $1.80 per share of stock. Its target payout ratio is 38 percent. The company expects to have an earnings per share of $4.35 one year from now.

Question 1:
If the adjustment rate is .45 as defined in the Lintner model, what is the dividend one year from now? Round your answer to 3 decimal places. (e.g., 32.161))

Dividend : $ _________

Question # 2:
If the adjustment rate is .75 instead, what is the dividend one year from now? . Round your answer to 3 decimal places. (e.g., 32.161)

Dividend : $________

Question # 3:
Which adjustment rate is more conservative? Higher Adjustment or Lower Adjustment?

Purchase this Solution
Solution Summary

This solution illustrates how to use the Lintner Dividend Adjustment Factor to determine a future year's dividends.

Purchase this Solution
Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

View More Free Quizzes
Related BrainMass Solutions

  • Dividend Smoothing

    If the adjustment rate is .3 as defined in the Lintner model,what is the dividend one year from now? b. If the adjustment rate is .6 instead,what is the dividend one year from now? c. Which adjustment rate is more conservative? why?

  • Dividend adjustment model

    Dividends for the year = adjustment rate * target payout rate*year's earnings + (1-adjustment rate)*Dividend paid last year For this year Adjustment rate = 0.75 Target payout rate=0.25 Year's earnings=8.00 Dividend paid last year=1.00 Dividends

  • Regional Software: Dividend Adjustment Model

    The firm's chief financial officer would like the firm to distribute 25% of its annual earnings (POR = 0.25) and adjust the dividend rate to changes in earnings per share at the rate ADJ = 0.75.

  • Adjustments to the Earnings Per Share

    a) Annual preferred dividend, b) Annual preferred dividend times (one minus the income tax rate), c) annual preferred dividend times the income tax rate or d) the annual preferred dividend by the income tax rate. Why?

  • Dividend Adjustment Model

    251653 Dividend Adjustment Model Regional Software has made a bundle selling spreadsheet software and has begun paying cash dividends.

  • Regional Software has made a bundle selling spreadsheet soft

    (Dividend adjustment model) Regional Software has made a bundle selling spreadsheet software and has begun paying cash dividends.

  • Dividend Theory and Stock Valuations

    Dividends paid for the year = adjustment rate * target payout rate*year's earnings + (1-adjustment rate)*Dividend paid last year c. Managers and investors seem more concerned with dividend changes than dividend levels. True d.

  • Corporate Dividend Policies - Assertions

    Dividends paid for the year = adjustment rate * target payout rate*year's earnings + (1-adjustment rate)*Dividend paid last year c. Managers and investors seem more concerned with dividend changes than dividend levels. True d.

  • Modigliani-Miller, distributions, payout policy, planning, forecasting

    The concept of sustainable growth rate and its importance in financial analysis Sustainable rate of growth is the maximum rate of growth in sales that the firm can sustain while maintaining its present capital structure.

View More Related Solutions