3. Pokemon Inc. is a toy manufacturer that reported after-tax operating income of $50 million in the most recent year. At the start of the year, the company reported book value of equity of $400 million, book value of debt of $250 million and a cash balance of $150 million. The company also reported capital expenditures of $75 million, depreciation of $ 30 million and a decrease in noncash working capital of $5 million. Assuming that it plans to maintain its current return on invested capital and reinvestment rate, what is the expected growth in operating income?

4. Assume that you are comparing the dividend payout ratios of computer software companies and have run a regression of payout ratios on expected growth in earnings per share:

Dividend Payout ratio = 0.60 1.5 (Expected growth rate)

Thus, with an expected growth rate of 20%, your expected payout ratio would be how much? If a company pays no dividends, how high

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