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    Dividend Questions

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    Please help with the following questions

    Plato Inc. expects net income of $5,000,000 next year. Plato's target capital structure is 35% debt and 65% equity. Management estimates that the optimal capital budget for the coming year is $6,000,000. If Plato follows a residual dividend policy, what is its payout ratio?

    a. 38%

    b. 42%

    c. 58%

    d. 33%

    e. 22%

    Simon Utility expects net income of $5 billion this year. The company has an estimated capital budget of $4 billion, and its capital structure is 65% common equity and 35% debt. If the company follows a strict residual dividend policy, what is the company?s expected dividend payout ratio?

    a. 0.00%

    b. 35.00%

    c. 48.00%

    d. 65.00%

    e. 100.00%

    A firm has current after tax earnings of $1,000,000 and has declared a cash dividend of $400,000. The firm's dividend payout ratio is

    a 2.5 percent.
    b 2.0 percent.
    c 4.0 percent.
    d 40 percent.

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    Solution Preview

    1. In residual policy, first all equity needs are met and the remaining amount is paid as dividend. The capital budget is $6,000,000 ...

    Solution Summary

    The solution explains some multiple choice questions relating to dividends