Dividend Policy

Here are several assertions about typical corporate dividend policies. Which of them are true? Write out a corrected version of any false statements. a. Most companies set a target dividend payout ratio. b. They set each year's dividend equal to the target payout ratio times that year's earnings. c. Managers and investors seem more concerned with dividend changes than dividend levels. d. Managers often increase dividends temporarily when earnings are unexpectedly high for a year or two.

Dividend Policy II

For each of the following four groups of companies, state whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to have a relatively high or low price-earnings ratio. a. High-risk companies. b. Companies that have recently experienced a temporary decline in profits. c. Companies that expect to experience a decline in profits. d. 'Growth' companies with valuable future investment opportunities. 'Risky companies tend to have lower target payout ratios and more gradual adjustment rates.' Explain what is meant by this statement. Why do you think it is so?

WACC

1) Why is WACC important to an organization? 2) What impact does WACC have on capital budgeting and structure?

Plank's Plants : Sustainable Growth Rate

17. Plank's Plants had net income of $2,000 on sales of $50,000 last year. The firm paid a dividend of $500. Total assets were $100,000, of which $40,000 was financed by debt. a. What is the firm's sustainable growth rate? b. If the firm grows at its sustainable growth rate, how much debt will be issued next year? c. What would be the maximum possible growth rate if the firm did not issue any debt next year? A firm's profit margin is 10 percent and its asset turnover ratio is .6. It has no debt, has net income of $10 per share, and pays dividends of $4 per share. What is the sustainable growth rate?

Components of master budget

Describe how the master budget and its components are developed for a manufacturing firm