Q#1

Company A Company B Company C

Operating income

Good 10 10 10

Average 7 7 7

Poor 5 5 5

Financial structure

Current liabilities 0 1 2

Non Current Liabilities 4 3 0

Share holder equity 6 6 8

Tax rate 50 %

Interest rate 10%

Required

1. Find out net income of each company in each economics environment
2. Find out return on equity of each company in each economics environment which firm have best financial structure in each economics environment

Q#2 ABC Corporation has 1.3 million common shares outstanding and total earnings of $2.4 million. The firm paid dividends totaling $550,000.

• What were the dividends per share paid by ABC?
• What was ABCs dividend payout ratio?