Suppose that you are analysing the capital requirements for your Corporation for next year. You forecast that the company will need $15 million to fund all of its positive-NPV projects and you job is to determine how to raise the money. The corporation’s net income is $11 million, and it has paid a $2 dividend per share (DPS) for the past several years (1 million shares of common stock are outstanding); its shareholders expect the dividend to remain constant for the next several years. The company’s target capital structure is 30% debt and 70% equity. H. If a firm follows the residual distribution policy, what actions can it take when its forecasted retained earnings are less than the retained earnings required to fund its capital budget? I. Define the term ‘Dividend Policy’? What are the main elements of the Dividend Policy? J. What are the different theories on investor preference for dividends? Explain each theory?
Suppose that you are analysing the capital requirements for your Corporation for next year. You
H. If a firm follows the residual distribution policy, what actions can it take when its forecasted retained earnings are less than the retained earnings required to fund its capital budget?
I. Define the term ‘Dividend Policy’? What are the main elements of the Dividend Policy?
J. What are the different theories on investor preference for dividends? Explain each theory?
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