Author Question: GNB Inc. sets its dividend using the target payout model. Using the data in the table, below, ... (Read 49 times)

Alainaaa8 · **on:** Apr 25, 2021

Question 1

Gecko & Co. uses the residual dividend model to set its dividends. Selected financial information for Gecko is provided in the table below.

Selected Financial Information

Gecko & Co.

Net income	$32 million
Investments	$36.9314 million
Dividends per Share	$0.40
Shares Outstanding	15.37 million

What is Gecko's capital structure weight for equity?
◦ 0.30
◦ 0.40
◦ 0.50
◦ 0.60
◦ 0.70

Question 2

GNB Inc. sets its dividend using the target payout model. Using the data in the table, below, calculate the dividend for Year 1.

Selected Financial Information

GNB Inc.

Dividend per share Year 0	$1.446
Target Payout Rate	35%
Earnings per share Year 0	$3.50
Earnings per share Year 1	$3.35
Adjustment factor	0.15

◦ $1.296
◦ $1.397
◦ $1.436
◦ $1.438
◦ $1.446

Ahernandez18 · **Reply #1 on:** Apr 25, 2021

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