Dividend Questions
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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%
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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%
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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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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 ...
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