QUESTION 4 Over the past ten years, a firm has had the EPs shown in the following table Year EPS (S) 2001 4.00 1999 1998 2.80 0.25 (a) If the firm's dividend policy was based on a constant payout ratio of 40 per cent for all years with positive earnings and a zero payout otherwise, determine the annual dividend for each year (b) If the firm had a dividend payout of $I per share, increasing by $0. 10 per share whenever the dividend payout fell below 50 per cent for two consecutive years, what annual dividend did the firm pay each year? (c) If the firm's policy was to pay $0.50 per share each period except when EPS exceed $3, when an extra dividend equal to 80 per cent of earnings beyond $3 would be paid what annual dividend did the firm pay each year? (d) Discuss the pros and cons of each dividend policy exhibited in(a)to(c)above QUESTION 5 The earnings for the Crystal Cargo Company have been predicted for the next five years and are listed below. There are 1 million shares outstanding. Determine the yearly dividend per share to be paid if the following policies are enacted (a) Constant dividend payout ratio of 50 per cent (b) Each year, 90 per cent of profits after tax are issued as fully franked dividends ea After-tax Profits(S) 1400000 12345 2000000 1860000 900000 2800000October 2003 QUESTION 4 Over the past ten years, a firm has had the EPS shown in the following table: Year EPS ($) 2001 4.00 2000 3.80 1999 3.20 1998 2.80 1997 3.20 1996 2.40 1995 1.20 1994 1.80 1993 -0.50 1992 0.25 (a) If the firm’s dividend policy was based on a constant payout ratio of 40 per cent for all years with positive earnings and a zero payout otherwise, determine the annual dividend for each year. (b) If the firm had a dividend payout of $1 per share, increasing by $0.10 per share whenever the dividend payout fell below 50 per cent for two consecutive years, what annual dividend did the firm pay each year? (c) If the firm’s policy was to pay $0.50 per share each period except when EPS exceed $3, when an extra dividend equal to 80 per cent of earnings beyond $3 would be paid, what annual dividend did the firm pay each year? (d) Discuss the pros and cons of each dividend policy exhibited in (a) to (c) above. QUESTION 5 The earnings for the Crystal Cargo Company have been predicted for the next five years and are listed below. There are 1 million shares outstanding. Determine the yearly dividend per share to be paid if the following policies are enacted: (a) Constant dividend payout ratio of 50 per cent. (b) Each year, 90 per cent of profits after tax are issued as fully franked dividends. Year After-tax Profits ($) 1 1 400 000 2 2 000 000 3 1 860 000 4 900 000 5 2 800 000