Consider the following simplified financial statements for the Phillips Corporation (assuming no income taxes): Income Statement...

Consider the following simplified financial statements for the Phillips Corporation (assuming no income taxes):

Income Statement		Balance Sheet
Sales	$25,000	Assets	$10,000	Debt	$4,600
Costs	13,200			Equity	5,400
Net income	$11,800	Total	$10,000	Total	$10,000

Phillips has predicted a sales increase of 11 percent. It has predicted that every item on the balance sheet will increase by 11 percent as well.

Required:

Calculate the dividend paid. (Do not round your intermediate calculations.)

Solutions

Expert Solution

Net income next year = $11,800 * 1.11 = $13,098

Equity next year = $5,400 * 1.11 = $5,994

Equity next year = Equity today + Net income next year - Dividend paid

$5,994 = $5,400 + $13,098 - Dividend paid

Dividend paid = $5,400 + $13,098 - $5,994

Dividend paid = $12,504

jeff jeffy answered 2 years ago

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