(Dividend policies) Final earnings estimates for Chilean Health Spa
& Fitness Center have been prepared for the CFO of the company and
are shown in the following table. The firm has 7,500,000 shares of
common stock outstanding. As assistant to the CFO, you are asked to
determine the yearly dividend per share to be paid depending on the
following possible policies:
YEAR PROFITS AFTER TAXES
1 $ 18,000,000
2 21,000,000
3 19,000,000
4 23,000,000
5 25,000,000
a. A stable dollar dividend targeted at 40 percent of earnings over a 5-year period
b. A small, regular dividend of $0.60 per share plus a year-end extra
when the profits in any year exceed $20,000,000. The year-end extra
dividend will equal 50 percent of profits exceeding $20,000,000.
c. A constant dividend payout ratio of 40 percent
Click here for the solution: Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table
