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) 100 124 164 221 300 Capital investment ($ millions) 180 300 300 366 520 Target book value debt to equity ratio ( ) 130 130 130 130 130 Dividend payout ratio ( ) Marketable securities ($ millions) 240 240 240 240 240 (Year 0 marketable securities $240 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 $240 million in marketable securities What will the annual dividend payout ratio be (Hint Remember sources of cash must equal uses at all times )

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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	124	164	221	300
Capital investment ($ millions)	180	300	300	366	520
Target book value debt-to-equity ratio (%)	130	130	130	130	130
Dividend payout ratio (%)	?	?	?	?	?
Marketable securities ($ millions)	240	240	240	240	240
(Year 0 marketable securities = $240 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 $240 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.)

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