Question
(Dividend policies) Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in
(Dividend policies)
Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table:
YEAR | PROFITS AFTER TAXES |
| |
1 | $18,000,000 | ||
2 | 21,000,000 | ||
3 | 19,000,000 | ||
4 | 23,000,000 | ||
5 | 25,000,000 | ||
(Click on the icon located on the top-right corner of the data table above in order to copy its contents into aspreadsheet.) |
The firm has 7,700,000 shares of common stock outstanding. As assistant to the CFO, you are asked to determine the yearly dividend per share to be paid depending on the following possible policies:
a. A stable dollar dividend targeted at 50 percent of earnings over a 5-year period.
b. A small, regular dividend of $0.50 per share plus a year-end extra when the profits in any year exceed $20,000,000.
The year-end extra dividend will equal 60 percent of profits exceeding $20,000,000.
c. A constant dividend payout ratio of 40 percent.
a. What is the yearly dividend per share to be paid depending on a stable dollar dividend targeted at 50 percent of earnings for years 1 through 5?
$ per share(Round to the nearest cent.)
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