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consists of 70% debt and 30% equity. The company anticipates that its capital budget for the
upcoming year will be $3,000,000. If Axel reports net income of $2,000,000 and it follows a
residual dividend payout policy, what will be its dividend payout ratio?
Debt 70%
Equity 30%
P0 $ 90.00
P1 90/(3/2)
60 1.5
0
Beta Industries has net income of $2,000,000, and it has
1,000,000 shares of common stock outstanding. The companys stock currently trades at
$32 a share. Beta is considering a plan in which it will use available cash to repurchase 20%
of its shares in the open market. The repurchase is expected to have no effect on net income
or the companys P/E ratio. What will be Betas stock price following the stock repurchase?
NI $ 2,000,000
P0 32
g 9%
D 0.75