minicase for company

There is a widespread concern about rising levels of debt. Debt can become disastrous for those who live alone or those families who are already having problems with supporting their family. The people who might be struck by debt, they might have trouble recovering. Debt can cause Americans to lose their homes and stability they need to feed, and shelter their families. Although debt comes upon us Americans quickly, people can see debt as terrible thing to be stuck with. It has many disadvantages that can devastate to people.

The dividend policy has grown over the years. This may be so that the company projects itself as a less risky share and thus also gaining investors faith. The investors buy its shares and thus increase its demand. This helps to gives positive signals to the investors signalling that the company is stable and can generate earnings steadily. This hypothesis is gains standing from the dividend hypothesis theory.

managers must be careful how they use the money of the firm. Debt creates a

The answers are both the same as the answers of question 2 (PV of the interest tax shield).

When a company decides to pay dividends, it has to be careful on how much it will be given to the shareholders. It is of no use to pay shareholders dividends

2. to avoid the company dwindling away assets and further reducing any return to creditors.

- Merlo, Inc. maintains a debt-equity ratio of 0.25 and follows a residual dividend policy. The company has after-tax earnings of $3,800 for the year and needs $3,200 for new investments. What is the total amount Merlo will pay out in dividends this year?If debt = 0.25 and equity = 1, then debt + equity = 1.25. Equity portion of new investments = $3,200 × (1 / 1.25) = $2,560.00

For your job as the business reporter for a local newspaper, you are asked to put together a series of articles on multinational finance and the international currency markets for your readers. Much recent local press coverage has been given to losses in the foreign exchange markets by JGAR, a local firm that is the subsidiary of Daedlufetarg, a large German manufacturing firm.

A high dividend payout policy reduces the rate of growth in earnings, g = br. For any rate of return on investment (r), the larger the payout ratio (the smaller the value of b), the slower the rate of growth. Lumber firms in general (Georgia Atlantic is an exception) have approximately a 35 percent payout ratio. Since the other companies have, on average, been growing at a rate of about 7 percent annually over the last twenty years, versus an average growth rate of 2.47 percent for Georgia Atlantic, it is clear that Georgia Atlantic's ROE on investment is substantially below the industry average.

In practice, dividend policy will be affected by taxes as tax rates for different categories of investors will differ. Also, a firm’s dividend policy is perceived by the financial markets to be a signaling mechanism. A cut back in dividends may signify that the firm perceives tough

Based on the financing needs, as above dividends would be additional stretch on company finances

| Increase EPS/ROE, pos. sign of future earnings, Lower tax rate compare to div policy

(5 points) In a world with no frictions (i.e., taxes, etc.), having debt is always better because it increases the value of the firm/projet.

The Dividends per share = Dividends paid & declaredNumber of issued ordinary shares×100c= 260cents in 2016 (increased from 237cents in 2015). To further comment on the EPS and DPS, I calculated the %Amount distributed to the shareholders = DPSEPS×100=260912.1×100=28.51% (which is a

In above case there might be companies that are healthy and many go through period of financial distress. In particular is the threat of not being able to meet debt obligations.