Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

XYZ is evaluating its dividend policy and has provided for you the following information 2000 1999 1998 Revenues 1 100 1 200 1 700 Net

XYZ is evaluating its dividend policy and has provided for you the following information 

2000 1999 1998 

Revenues 1 100 1 200 1 700 

Net income 30 70 140 

Total noncash working capital as of revenues 11 10 7 

Dividend payout ratio 000 10 20 

The dividend payout ratio is the ratio of the total amount of cash dividends to the net income of the company. The noncash working capital is currently 150 million (in the end of 1999) and the company has a cash balance of 30 million right now. The company forecasts that for the next year (2000), the depreciation will amount to 75 million and capital expenditures will be 125 million. You expect the depreciation to grow by 11 and the capital expenditures by 7 for the remaining years. You may assume that the company would like to double its cash balance by the end of year 3 and do a stock buyback in year 3. Your task is to estimate how much cash the company will have available for its buyback.

Step by Step Solution

3.49 Rating (159 Votes )

There are 3 Steps involved in it

Step: 1

The dividend payout ratio is the ratio of the total amount of cash dividends to the net in... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting A Managerial Emphasis

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

13th Edition

8120335643, 136126634, 978-0136126638

More Books

Students also viewed these Accounting questions

Question

What are the typical elements within the articles of incorporation?

Answered: 1 week ago