Delta Corporation earned $2.50 per share during fiscal year 2008 and paid cash d

Question

Delta Corporation earned $2.50 per share during fiscal year 2008 and paid cash dividends of $1.00 per share. During the fiscal year that just ended on December 31, 2009, Delta earned $3.00 per share, and the firms managers will expect to earn this amount per share during fiscal years 2010 and 2011, as well.

A.) What was Delta’s payout ratio for fiscal year 2008?

B.) If Delta’s managers want to follow a constant nominal dividend policy, what dividend per share will they declare for fiscal year 2009?

C.) If Delta’s managers want to follow a constant payout ratio dividend policy, what dividend per share will they declare for fiscal year 2010?

D.) If Delta’s managers want to follow a partial-adjustment strategy, with a target payout ratio equal to FY 2008’s, how could they change dividend payments during 2009, 2010, and 2011?

Explanation / Answer

1. Delta’s payout ratio for fiscal year 2008 = DPS/EPS = $1/$2.50 = .40 or 40%

2. Dividend per share 2009 = $1

3.Dividend per share 2010= EPS * payout ratio = $3 * 40% = $1.20

4.DPS for 2009, 2010,2011 = EPS * payout ratio = $3 * 40% = $1.20

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.