Question

In: Finance

​(Constant dividend payout ratio policy​) The Blunt Trucking Company needs to expand its fleet by 70...

​(Constant dividend payout ratio policy​)

The Blunt Trucking Company needs to expand its fleet by 70 percent to meet the demands of two major contracts it just received to transport military equipment from manufacturing facilities scattered across the United States to various military bases. The cost of the expansion is estimated to be $11million. Blunt maintains a 40 percent debt ratio and pays out 50 percent of its earnings in common stock dividends each year.

a. If Blunt earns $4 million next​ year, how much common stock will the firm need to sell in order to maintain its target capital​ structure?

b. If Blunt wants to avoid selling any new stock but wants to maintain a constant dividend payout percentage of 50

​percent, how much can the firm spend on new capital​ expenditures?

a. If Blunt earns $4 million next​ year, how much common stock will the firm need to sell in order to maintain its target capital​ structure?

​$ million  ​(Round to two decimal​ places.)

b. If Blunt wants to avoid selling any new stock but wants to maintain a constant dividend payout percentage of

50 ​percent, how much can the firm spend on new capital​ expenditures?

​$ million  ​(Round to two decimal​ places.)

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Compare and contrast the following dividend policies: the constant payout ratio policy and the constant dollar...
Compare and contrast the following dividend policies: the constant payout ratio policy and the constant dollar payout policy. Which policy do most public companies actually follow? Why?
1. Define target payout ratio and optimal dividend policy?
1. Define target payout ratio and optimal dividend policy?
​(Constant dollar dividend payout policy​) Parker Prints is in negotiation with two of its largest customers...
​(Constant dollar dividend payout policy​) Parker Prints is in negotiation with two of its largest customers to increase the​ firm's sales dramatically. The increase will require that Parker expand its production facilities at a cost of $35 million. Parker expects to pay out $6.5 million in dividends to its shareholders next year. Parker maintains a 40 percent debt ratio in its capital structure. a. If Parker earns $20 million next​ year, how much common stock will the firm need to...
Guzman Trucking Company needs to acquire a new machine to expand its operations. The machine can...
Guzman Trucking Company needs to acquire a new machine to expand its operations. The machine can be leased or purchased. The firm is in the 40% tax bracket and its after-tax cost of debt is 5.4%. The terms of the lease and purchase are as follows: Lease: The leasing arrangement requires beginning of year payments of $16,900 over five years.   The lessor assumes all maintenance costs. Purchase: If Guzman purchases the machine, the cost of $80,000, will be financed with...
A company just started to pay dividends. Its dividend payout ratio is 30%. An analyst expected...
A company just started to pay dividends. Its dividend payout ratio is 30%. An analyst expected the company growing fast at the following first two years at a dividend growth rate of 10% per year. After that the company will slow down to an annual growth rate of 5% forever. The company’s required rate of return is 8% per annual. If the company’s last annual earning is $10 per share, what’s the stock price the analyst should expect now? A...
SUBJECT 3 a. A company with a dividend payout ratio of 40% for 2018, has a...
SUBJECT 3 a. A company with a dividend payout ratio of 40% for 2018, has a ROE of 10%. The dividends and stock’s earnings are expected to grow at the same rate. The current year earnings per share are 7 euros and the company has a beta coefficient of 1. The risk-free rate is 6% and analysts estimate that the market risk premium is 5%. Taking into account the above information, estimate: I. The expected growth rate, and its P/E...
If a Corp has a 13% ROA and a 20% payout (dividend) ratio, what is its...
If a Corp has a 13% ROA and a 20% payout (dividend) ratio, what is its sustainable growth rate? If it is debt-free, what is its internal growth rate? A company has net income of $265,000, a profit margin of 9.3%, and an accounts receivable balance of $145,000. Assuming 40% of sales are on credit, what is the company’s days sales in receivables? A company wishes to maintain a growth rate of 12% per year and not exceed a debt-to-equity...
Find out constant payout ratio in %, Constant Growth rate in %, Residual Distribution pay out ratio in %.
MethodRequiredParameterUoMYears2016Constant Payout Ratio MethodNet IncomeAmount2,843,186Dividend PaidAmount1,192,827Payout Ratio%????Dividend Constant Growth MethodDividend PaidAmount1,192,827Growth%????Residual Distribution MethodNet IncomeAmount2,843,186Retained EarningAmount1,650,359Dividend PaidAmount1,192,827Payout Ratio%????Find out constant payout ratio in %, Constant Growth rate in %, Residual Distribution pay out ratio in %. Based on your working, please specify with proper justification that which method the company is following to pay dividends?      Constant Payout Ratio MethodDividend Constant Growth MethodResidual Distribution MethodJustification  ________________________Mark with "YES" _______________________
Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. No external equity financing is possible.
The most recent financial statements for Live Co. are shown here:   Income Statement Balance Sheet   Sales $10,000     Current assets $21,563     Debt $21,252     Costs 6,000     Fixed assets 15,089     Equity 15,400     Taxable income $4,000       Total $36,652       Total $36,652     Taxes (33%) 1,320       Net income $2,680   Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. No external equity financing is possible. Required: What is the sustainable growth rate? (Do not round...
Compare and contrast share dividend with cash dividend used by firms in their payout policy.
Compare and contrast share dividend with cash dividend used by firms in their payout policy.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT