Desert A/C plans to invest $50 million to expand operations. The firm wants to maintain a...
Desert A/C plans to invest $50 million to expand operations. The firm wants to maintain a 60 percent debt/assets ratio in its capital structure. If net income is expected to be $25 million this year and Desert follows the residual dividend policy, what amount of dividends will be paid this year?
Homework Answers
The amount of dividends will be paid this year is computed as shown below:
= $ 50 million x 60% - $ 25 million
= $ 5,000,000
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