![phancharamachasm](/avatars/22247.jpg)
phancharamachasm
30.03.2020 •
Business
A1 Enterprises is considering the following the following three independent projects ranked according to their risk, cost of capital and internal rate of return (IRR):Note that the projects’ costs of capital vary because the projects have different levels of risk. The company’s optimal capital structure calls for 40% debt and 60% common equity, and it expects to have net income of $5,000,000. If A1 establishes its dividends from the residual dividend model, what will be its payout ratio?
Solved
Show answers
More tips
- H Health and Medicine 10 Ways to Cleanse Your Colon and Improve Your Health...
- W Work and Career How to Write a Resume That Catches the Employer s Attention?...
- C Computers and Internet Е-head: How it Simplifies Life for Users?...
- F Family and Home How to Choose the Best Diapers for Your Baby?...
- F Family and Home Parquet or laminate, which is better?...
- L Leisure and Entertainment How to Properly Wind Fishing Line onto a Reel?...
- L Leisure and Entertainment How to Make a Paper Boat in Simple Steps...
- T Travel and tourism Maldives Adventures: What is the Best Season to Visit the Luxurious Beaches?...
- H Health and Medicine Kinesiology: What is it and How Does it Work?...
- O Other How to Choose the Best Answer to Your Question on The Grand Question ?...
Answers on questions: Business
- C Computers and Technology Ben is writing web page content on a newly launched gaming gadget. He has to use hyperlinks to help visitors navigate to web pages that deal with other types of electronic...
- B Business Manufacturers trying to implement a just-in-time delivery system need to start with...
- C Computers and Technology Reggie suddenly decided to drive to the grand canyon, because he had never seen it. he didn’t even have a map showing him how to get there! reggie made a(n)...
- M Mathematics Find x? In 3x - In(x - 4) = ln(2x - 1) +ln3...
Ответ:
In the question, investment to be made in new project is not given. Therefore it is assumed that $4,000,000 will be invested in the new project;
Explanation:
Debt Financing= $4,000,000*40%=$1,600,000
Equity Financing=$4,000,000*60%=$2,400,000
Residual Dividend formula=Net income-Equity financing
Residual dividend=$5,000,000-$2,400,000=$2,600,000
Therefore $2,600,000 will be paid as dividends if the required new investment are $4,000,000.
In case of different new investment amount, we can easily work out the revised figures through above formulas.
Ответ:
Please refer to the explanation section
Explanation:
The question is incomplete. The amount that A1 Enterprises wants to invest in new projects is not provided in the question. We will provide an assumed amounts in order to clearly illustrate how to approach questions of this nature.
Residual Dividend Model
Residual Dividend Model is a Dividends Payout Policy or method that companies may use in determining the amount of earnings that will be distributed to the Shareholders of the company (dividends). Companies using this model prefer Financing all their project using earnings.
When a Company uses Residual Dividend Model reinvestment of earnings takes priority. The company will identify projects and determine the amount of funds needed to finance new projects. The company will then use earning to finance new projects than the remainder of the earnings amount will be paid to shareholders.
Residual Dividend Model Method assumes that shareholders perceives Capital Gains and Share Dividends to be of the same value meaning Shareholders do not care whether they receive dividends or capital gains as long as they bring the same value. This assumptions is the reason market value is immune to the decision to reinvest earnings first before paying dividends. The Market Value is not affected because Shareholders considers share holders and dividends to be equal in Value.
Let us assume A1 Enterprises wishes to invent $3000 000 in the new projects.
Net Income or Earnings after tax =$5000 000
Earnings to be distributed as dividends = $5000 000 - $3000 000
Earnings to be distributed as dividends = $2000 000
Dividends Pay out Ratio = $2000 000/$5000 000
Dividends Pay out Ratio = 0.4 = 40%
When A1 enterprises uses earnings to finance new projects, The payout Ratio is 40% if we assume the A1 enterprises wants to invest $3000 000 in new projects.
Ответ:
$3,000, because the homeowner failed to timely notify the company of the termite infestation.
Explanation:
It should be noted that a party to a contract shouls be able to curtail damages to a property and therefore avoid undue risk or expense that may be incurred.
Based on the question, the homeowner could have easily avoided the $25000 paid for the costs of the repairs if he didn't delay the notifying of the pest control company.
Therefore, based on this scenario, the homeowner's damages will be limited to the amount of $3000. Therefore, the damages that the court should award the homeowner is $3,000, because the homeowner failed to timely notify the company of the termite infestation.