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that consisits 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?
NI $2,000,000
- Additions to RE 900,000
Earnings remaining $1,100,000
$1,100,000
Payout = $2,000,000 = 55%.
15-2 Stock Split: gamma medicals stock trades at $90 a share, The company is
contemplation a 3 for 2 stock split. Assuming that the stock split will have no effect on
the market value of its equity, what will be the companys stock price following the stock
split?
$90
= $60.
3 /2
c. If the payables deferral period was increased by 5 days, then its cash
conversion cycle would decrease by 5 days, so its working capital financing
needs would decrease by
Decrease in working capital financing = 1,500 5 $6 = $45,000.