FINANCIAL MANAGEMNET PART 2

Question 1

KejoraJLand has total earnings last year of RM5,500,000 but expect total earnings to increase to RM5,750,000 this year because of a booming in the housing industry. There are currently 1,000,000 shares of common stock outstanding. The company has RM4,000,000 worth of investments to undertake this year. The company finances 30 percent of its investments with debt and 70 percent with equity capital. The company paid RM2.80 per share dividend last year.

(A) If the company follows a pure residual dividend policy, how large a dividend will shareholder receive this year?

(B)If the company maintains a constant dividend payout ratio each year, how large a dividend will each shareholder receive this year?

(C) If the company follows a constant dollar dividend policy, how large a dividend will each shareholder receive this year?

QUESTION 2

Birdie Sdn Bhd imports and markets special floating golf balls to various clients throughout Malaysia. The company is reviewing its purchasing policy. It expects to sell 624,000 balls next year. The cost price of each ball is RM2.40 and is sold in dozens. Storage and other carrying cost are estimated at RM0.10 per ball. Ordering cost is RM20 per order. The delivery time is two weeks and safety stock level are 12,000 balls. The demand for such balls per year is about 52,000 dozen.

Calculate: The re-order levels.