1. XYZ company expects next years net income to be $15 million. The firms debt ratio is currently 40%. XYZ has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should XYZs dividend payout ratio be next year?
2. Explain the steps a manager may follow in setting Dividend Policy.
3. Generally, the distribution decision is made jointly with capital structure and capita budgeting decisions. The underlying reason for joining these decisions is asymmetric informationmanagers know more than investors know about their companys prospects. Explain how asymmetric information influences managerial actions