Question

​(Dividend policies​) Final earnings estimates for Chilean Health Spa​ & Fitness Center have been prepared for the CFO of the company and are shown in the following​ table: LOADING... . The firm has 7 comma 600 comma 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. b. A​ small, regular dividend of ​$0.70 per share plus a​ year-end extra when the profits in any year exceed ​$21 comma 000 comma 000 . The​ year-end extra dividend will equal 50 percent of profits exceeding ​$21 comma 000 comma 000 . c. A constant dividend payout ratio of 35 percent.

YEAR   PROFITS AFTER TAXES
1   19,000,000
2   22,000,000
3   20,000,000
4   24,000,000
5   26,000,000

Answer 1

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