This is an essay question. Need 350 – 500 words:
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This is an essay question. Need 350 – 500 words:
Coppell Timber Company had total earnings last year of $5,000,000, but expects total earnings to drop to $4,750,000 this year because of a slump in the housing industry. There are currently 1,000,000 shares of common stock outstanding. The company has $4,000,000 worth of investments to undertake this year. The company finances 40 percent of its investments with debt and 60 percent with equity capital. The company paid $3.00 per share in dividends last year.
a.) If the company follows a pure residual dividend policy, how large a dividend will each shareholder receive this year?
b.)If the company maintains a constant dividend payout ratio each year, how large a dividend will each shareholder receive this year?
c.)If the company follows a constant dollar dividend policy, how large a dividend will each shareholder receive this year?
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