The senior management team at Bettis Company is working on setting its dividend payout policy for the current year. The team is debating whether to pay out 75% or 25% of its net income as a dividend. Bettis is an all-equity financed company, and it has $700 million of assets at the end of its most recent year. Bettis has a cost of equity of 6.81%. The following shows a simplified income statement forecast for the coming year.

Calculate Bettiss growth rate of assets if the company pays out 75% of its net income as a dividend. (5 points)

ANSWER TO Question 5a:

Growth rate at 75% dividend payout = ___________%

Calculate Bettiss growth rate of assets if the company pays out 25% of its net income as a dividend. (5 points)

ANSWER TO Question 5b:

Growth rate at 25% dividend payout = ___________%

Does the value of Bettiss shares change depending on the choice of dividend payout? Please provide a basic example demonstrating why or why not. (4 points)

ANSWER TO Question 5c:

DOES VALUE CHANGE (YES or NO): __________

WRITE YOUR RESPONSE HERE

\begin{tabular}{|l|rr|} \hline & & 2023 \\ \hline Sales & 5 & 1,000,000 \\ \hline - Expenses & 5 & 940,450 \\ \hline EBT & 5 & 59,550 \\ \hline - Taxes & 5 & 11,910 \\ \hline Net income & 5 & 47,640 \\ \hline \end{tabular}