Use the Following information for Questions 1 through 3 Growth rate 8% 2013 Dividends Paid $2.60 million 2013 Net Income $9.80 million 2014 Net Income $12.60 million Investment Plant Expansion $7.30 million Target debt ratio 35% Calculate Boehm’s total dividends for 2014 under each of the following policies: 1. Its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings. Dividends would grow at 8% 2014 dividends 2.808 million 2. It continues the 2013 dividend payout ratio. 2013 payout ratio 0.27 2014 dividends 3.34 million 3. It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt). Equity needed for investment 4.745 Net Income available $12.60 2014 dividends $7.86 million Regular Dividend 2.808 million Extra Dividend $5.05 million Use the Following information for Questions 5 and 6 The incremental profit is calculated as Current situation Units sold 50 Revenue 5,000,000 Fixed cost 2,000,000 Profit 500,000 Variable cost 2,500,000 Variable cost per unit 50,000 New Situation Fixed cost
HOMEWORK SET 5 or show your work if a mathemaTcal calculaTon is needed, or both. Submit your assignment using the assignment link in the course shell. ±his homework assignment is worth 100 points. YOU MUST ENTER CORRECT INFORMATION IN THE YELLOW-CODED CELLS DO NOT TOUCH THE NON-YELLOW-CODED CELLS ANSWERS ARE IN THE RED-BORDERED CELLS Use the following informa±on for Ques±ons 1 through 3: Boehm CorporaTon has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. ±his one-Tme unusual earnings growth won't be maintained, though, and aFer 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt raTo is 35%. Calculate Boehm's total dividends for 2014 under each of the following policies. 1. Its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings.