Untung Corporation had a net income of RM8 million in 2020. Earnings have grown at a...

 

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Untung Corporation had a net income of RM8 million in 2020. Earnings have grown at a 10% annual rate. Dividend payments in 2020 amounted to RM3 million. In 2021, the net income is RM11 million which represents a 37.5% growth rate from the previous year. However, it is expected that net income for future years will grow at 6% per annum similar to that experienced in 2020. The total investments in 2021 are RM8 million. Required: How much dividend should be paid in 2021, assuming (a) a stable dividend payout ratio of 25%? (b) a stable dollar dividend policy is maintained? (c) a residual dividend policy is maintained and 40% of the 2021 investment is financed with debt? (d) the investment for 2021 is to be financed with 80% debt and 20% retained earnings? Untung Corporation had a net income of RM8 million in 2020. Earnings have grown at a 10% annual rate. Dividend payments in 2020 amounted to RM3 million. In 2021, the net income is RM11 million which represents a 37.5% growth rate from the previous year. However, it is expected that net income for future years will grow at 6% per annum similar to that experienced in 2020. The total investments in 2021 are RM8 million. Required: How much dividend should be paid in 2021, assuming (a) a stable dividend payout ratio of 25%? (b) a stable dollar dividend policy is maintained? (c) a residual dividend policy is maintained and 40% of the 2021 investment is financed with debt? (d) the investment for 2021 is to be financed with 80% debt and 20% retained earnings?

Answer rating: 100% (QA)

Okay lets solve this stepbystep a Stable dividend payout ratio of 25 2020 Net Income RM8 mil... View the full answer