KBS Agriculture produces fertilizer and agricultural chemicals from its operations in the United States, which it sells globally. The company has paid dividends since 2000. Below exhibit shows financial information for the company.

Years Ending 31 December (US$ millions). 2019 2020 2021 2022

NET INCOME 2079 1785 1536 1270

CASH FLOW FROM OPERATIONS 3225 3212 2614 2338

CAPITAL EXPENDITURES 2,133 1,624 1,138 1,217

NET BORROWING (462) (153) 303 (27)

DIVIDENDS PAID 467 997 1141 1204

STOCK PURCHASES 0 411 1065 0

STOCK MARKET PRICE 11 10 15 12

On 31 December 2019, the number of stocks outstanding was 100 million. The stock repurchases made in 2020 and 2021 using the open market approach. Suppose KBS Agriculture has $900 million in planned capital spending (representing positive NPV projects) and its forecasted earnings is US$ 500 million in 2023. The company maintains a target capital structure (60% debt and 40% equity).

Requirements:

a) Using the above information, calculate the Dividend payout ratio and dividend coverage ratio for 2019, 2020, 2021, and 2022. Summarize your calculated ratios in a table. Comment on the observed trends and the sustainability of KBS Agriculturesdividend and stocks repurchase policy after 2021/2022.

[12 marks]

b) What is the dividend per share (DPS) for 2019, 2020, 2021, and 2022. Summarize your calculated DPS in a table. If KBS Agriculture changes to a constant dividend policy in 2023, what is the DPS in 2023 assuming no stock repurchase?

[10 marks]

c) If KBS Agriculture has been following a residual dividend policy, how much annual dividend will the company pay if the forecasted earnings in 2023 are realized.

PLEASE ANSWER IF YOU HAVE CONFIDENCE TO BE CORRECT. OTHERWISE I MAY GIVE DISLIKE. MANY THANKS