Excel Online Structured Activity: Dividend Policy Boehm Corporation has had stable earnings growth of 10% a year for the past 10 years, and in 2015 Boehm paid dividends of $3.4 million on net income of $12.5 million. However, in 2016 earnings are expected to jump to $17.5 million, and Boehm plans to invest $9.5 million in a plant expansion. This one- time unusual earnings growth won't be maintained, though, and after 2016 Boehm will return to its previous 10% earnings growth rate. Its target debt ratio is 35%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. 1 Alternative Dividend Policies 2 3 10-year earnings growth 4 2015 Dividends 5 2015 Net income 6 Expected 2016 Net income 7 Plant Expansion 8 Future earnings growth, after 2016 9 Debt ratio 10 11 Calculation of 2016 total dividends under different polic 12 2016 dividends if dividends grow at long-run earnings G 13 2016 dividends if continue 2015 dividend payout ratio 14 2016 dividends if it uses pure residual policy 15 2016 dividends under regular-dividend-plus-extras policy: 16 Regular dividends (based on long-run earnings growth rate) 17 Extra dividend (based on residual policy) 18 19 9272 20 A 21 raje B 10.00% $3,400,000 $12,500,000 $17,500,000 $9,500,000 10.00% 35.00% Formulas #N/A #N/A #N/A #N/A #N/A 4. It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy. How much will the extra dividend be? b. Which of the preceding policies would you recommend? Restrict your choices to the ones listed. Excel Online Structured Activity: Dividend Policy Boehm Corporation has had stable earnings growth of 10% a year for the past 10 years, and in 2015 Boehm paid dividends of $3.4 million on net income of $12.5 million. However, in 2016 earnings are expected to jump to $17.5 million, and Boehm plans to invest $9.5 million in a plant expansion. This one- time unusual earnings growth won't be maintained, though, and after 2016 Boehm will return to its previous 10% earnings growth rate. Its target debt ratio is 35%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. 1 Alternative Dividend Policies 2 3 10-year earnings growth 4 2015 Dividends 5 2015 Net income 6 Expected 2016 Net income 7 Plant Expansion 8 Future earnings growth, after 2016 9 Debt ratio 10 11 Calculation of 2016 total dividends under different polic 12 2016 dividends if dividends grow at long-run earnings G 13 2016 dividends if continue 2015 dividend payout ratio 14 2016 dividends if it uses pure residual policy 15 2016 dividends under regular-dividend-plus-extras policy: 16 Regular dividends (based on long-run earnings growth rate) 17 Extra dividend (based on residual policy) 18 19 9272 20 A 21 raje B 10.00% $3,400,000 $12,500,000 $17,500,000 $9,500,000 10.00% 35.00% Formulas #N/A #N/A #N/A #N/A #N/A 4. It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy. How much will the extra dividend be? b. Which of the preceding policies would you recommend? Restrict your choices to the ones listed
