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 (D) 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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