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It is December, the time for the board of directors to decide on dividend payments and next years capital spending. The company follows a constant
It is December, the time for the board of directors to decide on dividend payments and next years capital spending. The company follows a constant dividend payout ratio policy, with a long-term payout ratio of 30%, and a policy of maintaining a debt-to-equity ratio of 40% to 60%. The accounting department has just completed the companys annual income statement showing annual net earnings of $1,100,000. Management has identified several new investment projects with total costs of $1,300,000. The CFO has to make recommendations to the board of directors on how much cash dividend to pay out and how to finance the coming years investment projects. As an assistant to the CFO, you have been assigned to study the following
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