Question 1) The earnings for Crystal Cargo Inc. have been predicted for the next 5 years and are as follows. There is 1 million shares outstanding. Determine the yearly dividend per share to be paid if the following policies are enacted:
a. A constant dividend payout ratio of 50 percent.
b. A stable dollar dividend targeted at 50 percent of the earnings over the 5 year period.
c. A small, regular dividend of $0.50 per share plus a year-end extra when the profits in any year exceed $1,500,000. The year-end extra dividend will equal 50 percent of profits exceeding $1,500,000.
YEAR Profits After Taxes
1 $1,400,000
2 2,000,000
3 1,860,000
4 900,000
5 2,800,000
Question 2) You have developed the following income statement for the Hugo Boss Corporation. It represents the most recent year's operations, which ended yesterday.
Sales $50,349,375
Variable Costs (25,137,000)
Revenue before fixed costs $25,302,375
Fixed Costs (10,143,000)
EBIT $15,159,375
Interest Expense (1,488,375)
Earnings before taxes $ 13,671,000
Taxes at 50% (6,835,500)
Net Income $ 6,835,500
If sales should increase by 30 percent, by what percent would earnings before taxes (and net income) increase.