Delta Corporation earned $2.50 per share during fiscal year 2008 and paid cash dividends of $1.00 per

Question:

Delta Corporation earned $2.50 per share during fiscal year 2008 and paid cash dividends of $1.00 per share. During the fiscal year that just ended on December 31, 2009, Delta earned $3.00 per share, and the firms managers expect to earn this amount per share during fiscal years 2010 and 2011 as well.

a. What was Deltas payout ratio for fiscal year 2008?

b. If Deltas managers wish to follow a constant nominal dividend policy, what dividend per share will they declare for fiscal year 2009?

c. If Deltas managers wish to follow a constant payout ratio dividend policy, what dividend per share will they declare for fiscal year 2010?

d. If Deltas managers wish to follow a partial-adjustment strategy, with a target payout ratio equal to FY 2008s, how could they change dividend payments during 2009, 2010 and 2011?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...