Working in the Corporate Finance Department at Facebook, your team has been instructed by Mark Zuckerberg to conduct a deep and comprehensive analysis of the company's payout policy, with a focus on the possibility of initiating a dividend payment this year (year 1) to achieve a stable level of dividend (in dollar amounts) at the end of year 3. Considering the increased uncertainty in earnings induced in part by the pandemic, there is good reason to question the wisdom of initiating a dividend payout. Failure to meet shareholders' expectation of a regular dividend payment (once initiated) is likely to result in a share price decline, 4 potentially sending a message of lost confidence in sustainable earnings by management. The biggest challenge Facebook faces in this context is thus in balancing shortterm objectives with long-term risks; risks to long-term profitability are often overlooked when organizations are only focused on the delivery of short-term performance targets. Your team will make a proposal to Mark and Facebook's board based on the following tasks and lines of inquiry:

1. Under Mark's proposal to initiate a dividend payment at the end of this year, what is the stable level of dividend achievable in year 3 for Facebook (90% confidence level)?

Answer rating: 100% (QA)

To calculate the stable level of dividend achievable in year 3 for Facebook at a 90 confidence level we can utilize historical data to estimate the co... View the full answer