computing total dividends given, business and finance homework help
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On page 274, do questions 1 and 2
On page 237, do question 1 only
Read the case. Focus on the information directly given about Ragan, Inc (not its competitors)
Show all of these steps:
- Start by computing total dividends given to the brother and sister
- Determine total shares outstanding for brother and sister
- Determine total earnings for the company
- Determine what fraction of earnings is paid as dividends (Payout ratio)
- Then determine the fraction that is not paid as dividends (what is retained) = Retention ratio
- Calculate growth rate by using formula: g = (ROE) X (Retention Ratio)
- Determine the current dividend per share (D0 ) based on the dividends paid and number of shares
- Determine the value per share of the company’s stock (P0) by using:
P0 = D1 / (R – g)
(Notice the formula uses D1, the next year dividend, which you have to determine)
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