: Joe C Corporation has declared an annual dividend of $0.50 per share. For the year just ended, earnings were $8 per share.

Required:

a)What is Joe C's payout ratio? (1 mark)

b)Suppose Joe C has seven million shares outstanding. Borrowing for the coming year is planned at $18 million. What are planned investment outlays assuming a residual dividend policy? (2 marks)

c)What target capital structure is implicit in these calculations? (1 mark)

d)Why does the value of a share of stock depend on dividends? (1 mark)

Under what circumstances might a company choose not to pay dividends