Question
In March 2019, AAR Ltd reported net profits after tax of $500,000 for the year 2018 and announced that it will pay the annual dividend
In March 2019, AAR Ltd reported net profits after tax of $500,000 for the year 2018 and announced that it will pay the annual dividend on 1 June 2019. AAR expects the net profits after tax for 2019 to be 20% higher and it will maintain its current dividend payout ratio of 60%. AAR will pay the annual dividend for 2019 in 1 June 2020.
Karina Adams owns 10% of the ordinary share capital of AAR Ltd. She has no savings and her sole income comes from AAR Ltd. If Karina wishes to buy $5,000 worth of furniture in June 2019, and at the same time pays all her other bills totaling $35,000, calculate how much can she consume in June 2020? Assume the market rate of interest is 8% per annum.
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