Required: If the company follows a pure residual dividend policy, how large a dividend will each shareholder receive this year? If the company maintains a constant dividend payout ratio each year, how large a dividend will each shareholder receive this year? If the company follows a constant dollar dividend policy, how large a dividend will each shareholder receive this year?
Required: If the company follows a pure residual dividend policy, how large a dividend will each shareholder receive this year? If the company maintains a constant dividend payout ratio each year, how large a dividend will each shareholder receive this year? If the company follows a constant dollar dividend policy, how large a dividend will each shareholder receive this year?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 13P
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Question
Mah Seng Company Berhad had total earnings last year of $5 million but expects total earnings to drop to $4,750,000 this year because of a slowdown in the consumer sector. There are currently 1 million shares of common stock outstanding. The company has $4 million worth of investments to undertake this year. The company finances 40% of its investments with debt and 60% with equity capital. The company paid $3 per share in dividends last year.
Required:
- If the company follows a pure residual dividend policy, how large a dividend will each shareholder receive this year?
- If the company maintains a constant dividend payout ratio each year, how large a dividend will each shareholder receive this year?
- If the company follows a constant dollar dividend policy, how large a dividend will each shareholder receive this year?
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