The Claustrophobic Solution Inc, a residential window and door manufacturer, has
ID: 2766499 • Letter: T
Question
The Claustrophobic Solution Inc, a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2011 to 2007:
The company's payout ratio has been 60% over the last 5 years and the last quoted price of the firm's share of stock was $12. Flotation costs for new equity will be 6%. The company has 32,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.5. If dividends are expected to grow at the same arithmetic average growth rate of the last 5 years, what is the dividend payment in 2012?
Year 2011 2010 2009 2008 2007 EPS $ 1.10 $ 1.05 $ 1.00 $ 0.95 $ 0.90Explanation / Answer
Dividend payment in 2012 = EPS in 2012 * No. of outstanding shares * Payout ratio
= ($1.10 + $0.05) * 32,000,000 * 60%
= $22,080,000