1. You are the CEO of I am the top 1% Corporation, which has a capital structure of 60% equity and 40% debt. The estimated net income of your company is $600K. Your capital budget is $800K for the coming year. If you follow the residual dividend models, how much dividend you can pay and what is your pay-out ratio? What happens to dividend when estimated net income is $400K or $800K?
2. Discuss the advantages and disadvantages of Residual dividend policy.
3. What are the steps you consider in setting your dividend policy?
4. Explain the concept of DRIP with an example.