In 2019, Seaworthy Dingys earnings are expected to be $14.4 million, and the firm expects to have

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In 2019, Seaworthy Dingy’s earnings are expected to be $14.4 million, and the firm expects to have profitable investment opportunities of $8.4 million. Last year, the company paid dividends equal to $9 million. It is predicted that Seaworthy will grow at a constant rate of 5 percent in the future. What will be Seaworthy’s total dividends for 2019 if it follows 

(a) A policy that requires dividends to grow at the long-run growth rate in earnings 

(b) A pure residual dividend policy. Seaworthy’s target debt/ assets ratio is 40 percent.

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CFIN

ISBN: 9781337407342

6th Edition

Authors: Scott Besley, Eugene Brigham

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