Share
Explore BrainMass

Crystal Cargo Inc.

1)The earnings for Crystal Cargo Inc. have been predicted for the next 5 years and are as follows. There is 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 any year exceed $1,500,000. The year-end extra dividend will equal 50 percent of profits exceeding $1,500,000.

YEAR Profits After Taxes

1 $1,400,000
2 2,000,000
3 1,860,000
4 900,000
5 2,800,000

2) You have developed the following income statement for the Hugo Boss Corporation. It represents the most recent year's operations, which ended yesterday.

Sales $50,349,375
Variable Costs (25,137,000)
Revenue before fixed costs $25,302,375
Fixed Costs (10,143,000)
EBIT $15,159,375
Interest Expense (1,488,375)
Earnings before taxes $ 13,671,000
Taxes at 50% (6,835,500)
Net Income $ 6,835,500

If sales should increase by 30 percent, by what percent would earnings before taxes (and net income)increase.

Solution Preview

Financial management
1)The earnings for Crystal Cargo Inc. have been predicted for the next 5 years and are as follows. There is 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 any year exceed $1,500,000. The year-end extra dividend will equal 50 percent of profits exceeding $1,500,000.

YEAR Profits After Taxes Earnings per share (EPS)

1 $1,400,000 1.40
2 2,000,000 2.00
3 1,860,000 1.86
4 ...

Solution Summary

This solution is comprised of a detailed explanation to answer the financial management questions.

$2.19