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    Dividend Smoothing and Adjustment Rate

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    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?

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    https://brainmass.com/business/accounting-for-corporations/dividend-smoothing-adjustment-rate-513537

    Solution Summary

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

    $2.19