1.Lazenby Home Builders has a target dividend payout ratio of 25 percent. Last year, Lazenby earned $2.00 per share and paid a dividend of $0.25. This year, new home starts are expected to decline significantly and Lazenby expects to earnings to decline to $1.80 per share. Which of the following scenarios is least likely? Lazenby Home Builders: A) maintains its dividend at $0.25 per share. B) increases its dividend by 50%. C) cuts its dividend by 10%. D) Increases its dividend by $0.10 per share. Click for Answer and Explanation C) Despite falling earnings, a company will be reluctant to cut its dividend. With a target payout ratio of 25 percent, earnings per share of $1.80 would call for a dividend of $0.45. Even a dividend increase of $0.10 or an increase of 50 percent over the prior year’s dividend would still put the dividend below the target payout. 2.Rombauer Metals uses a target payout adjustment approach in paying its annual dividend. Last year, Rombauer had earnings per share (EPS) of $0.60 and paid a dividend of $0.08 per share. This year, Rombauer estimates its EPS will be $0.90. What is Rombauer’s expected dividend per share if the firm has a target payout ratio of 40 percent and uses a 4 year period to adjust its dividend? A) $0.15. B) $0.09. C) $0.28. D) $0.11. Click for Answer and Explanation D) Expected dividend = $0.08 + [($0.90 - $0.60) × 0.40 × (1/4)] Expected dividend = $0.08 + $0.03 = $0.11 3.Manthey Studios uses a target payout adjustment approach in paying its annual dividend. Last year, Manthey had earnings per share (EPS) of $2.50 and paid a dividend of $0.30 per share. This year, Manthey estimates its EPS will be $3.20. Manthey has a target payout ratio of 28 percent and uses a 5 year period to adjust its dividend. Which of the following is closest to Manthey’s expected dividend per share? A) $0.42. B) $0.34. C) $0.59. D) $0.70. Click for Answer and Explanation B) Expected dividend = $0.30 + [($3.20 - $2.50) × 0.28 × (1/5)] Expected dividend = $0.30 + $0.0392 = $0.3392 ≈ $0.34 4.Last year, Calfee Multimedia had earnings of $4.00 per share and paid a dividend of $0.30. In the current year, the company expects to earn $5.20 per share. Calfee has a 30 percent target payout ratio. If the expected dividend for this year is $0.39, what time period is Calfee most likely using in order to bring its dividend up to the target payout? A) 3 years. B) 6 years. C) 4 years. D) 8 years. Click for Answer and Explanation C) The formula to determine the expected dividend in a target payout approach is: Expected dividend = (previous dividend) + [(expected increase in EPS) × (target payout ratio) × (adjustment factor)], where the adjustment factor is 1/number of years over which the adjustment will take place. Using the numbers given: $0.39 = $0.30 + [($5.20 - $4.00) × (0.30) × (1/n)]
$0.39 = $0.30 + [($1.20) × (0.30) × (1/n)]
$0.09 = $0.36 × (1/n)
0.25 = (1/n)
n = 4 | 
发表于 2008-4-19 18:45
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