Question
Company A has declared an annual dividend of $0.25 per share. The net earnings for last year is $50 million, and the company has
Company A has declared an annual dividend of $0.25 per share. The net earnings for last year is $50 million, and the company has 8 million shares outstanding. (a) What is the pay out ratio? Payout ratio is the ratio of the dividend and the total earnings. (b) Suppose the company uses a residual dividend policy and has decided to ac- quire $23 million of new debt for capital spending. What are planned invest- ment outlays and what is the company's capital structure?
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