The firm has 7,500,000 shares of common stock outstanding. As
assistant to the CFO, you are asked to determine the yearly
dividend per share to be paid depending on the following possible
policies:
13-1. (Dividend policies) Final
earnings estimates forChileanHealth Spa & FitnessCenter have
been prepared for the CFO of the company and are shown in the
following table.
year
Profits after taxes
1
$ 18,000,000
2
21,000,000
3
19,000,000
4
23,000,000
5 25,000,000
The firm has 7,500,000 shares of common stock outstanding. As
assistant to the CFO, you are asked to determine the yearly
dividend per share to be paid depending on the following possible
policies:
a. A stable
dollar dividend targeted at 40 percent of earnings over a 5-year
period
c. A constant
dividend payout ratio of 40 percent
b. A small,
regular dividend of $0.60 per share plus a year-end extra when the
profits in any year exceed $20,000,000. The year-end extra dividend
will equal 50 percent of profits exceeding $20,000,000.
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