Question
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.
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