Question

XYZ corporation last year generated earnings only for $70,000 and paid dividends for $10,000.

For this year it has just generated an earnings (Net Income) for $150,000, and the company is thinking to expand a project and it needs a capital for $200,000.

The debt ratio of the company is 35%.

1. The dividend payout ratio of the last year was *

5%

6.666%

14.286%

46.666%

None of the above

2. Assuming the company will use the same payout ratio as last year, how much it should pay dividend for shareholders this year *

$21,428

$10,500

$5,362

$11,100

None of the above

3. If the company needs to expand its project, how much dividend it can pay for shareholders *

$35,000

$20,000

$25,000

$30,000

None of the above

4. If the company needs to expand its project, how much can be its payout ratio *

13.3%

20.2%

25.5%

12.6%

None of the above

5. If the company decides to don’t pay any dividends this year, how much is the maximum capital that it can use for expanding its project. *

$107,690

$230,770

$428,570

$145,960

None of the above

6. If the company decides to payout dividend 20% this year, but it needs to make a new project that needs a capital for $220,000. How much external equity is needed to finance the project. *

$25,050

$32,205

$23,000

$15,552

None of the above

Answer 1

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