Question
In: Finance
Alternative dividend policies Over the last 10 years, a firm has had the earnings per share...
Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table:
| Year | Earnings per Share | Year | Earnings per Share |
| 2019 | $1.50 | 2014 | $2.19 |
| 2018 | $3.93 | 2013 | $1.18 |
| 2017 | $3.76 | 2012 | $1.18 |
| 2016 | $3.99 | 2011 | -$1.07 |
| 2015 | $3.93 | 2010 | $0.85 |
a. If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2015?
b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for two consecutive years, what annual dividend would the firm pay in 2015?
c. If the firm's policy were to pay $0.50 per share each period except when earnings per share exceed $3.00, when an extra dividend equal to 80% of earnings beyond $3.00 would be paid, what annual dividend would the firm pay in 2015?
d. Discuss the pros and cons of each dividend policy described in parts a through c.
Solutions
Expert Solution
a. Annual dividend for 2015 :- $1.572
b. Annual dividend for 2015 :- $1.00
c. Annual dividend for 2015 :- $1.244
d. Pros and Cons of all three dividend policies are described in below attached solution sheet
Detailed solution has been attached here :-
jeff jeffy answered 1 year agoRelated Solutions
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.
2015
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2010
$3.55
2014
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2009
$1.76
2013
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2008
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2012
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2007
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2011
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2006
$0.56
a.??If the? firm's dividend policy were based
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earnings and? 0% otherwise, what would be the annual dividend
for
2015??
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