This is a more difficult but informative problem James Brodrick Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance its growth without selling new equity Selected information from the companys five year financial forecast follows Year 1 2 3 4 5 Earnings after tax ($ millions) 100 110 150 200 300 Capital investment ($ millions) 170 300 300 352 450 Target book value debt to equity ratio ( ) 120 120 120 120 120 Dividend payout ratio ( ) Marketable securities ($ millions) 220 220 220 220 220 (Year 0 marketable securities $220 million) a According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $220 million in marketable securities What will the annual dividend payout ratio be (Hint Remember sources of cash must equal uses at all times ) Note Round dividends to the nearest million dollars and the payout ratio to the nearest ones place

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Question: This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance

This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance its growth without selling new equity. Selected information from the companys five-year financial forecast follows.

Year	1	2	3	4	5
Earnings after tax ($ millions)	100	110	150	200	300
Capital investment ($ millions)	170	300	300	352	450
Target book value debt-to-equity ratio (%)	120	120	120	120	120
Dividend payout ratio (%)	?	?	?	?	?
Marketable securities ($ millions)	220	220	220	220	220
(Year 0 marketable securities = $220 million)

a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.)

Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place.

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