Question

ELE Ltd’s total earnings last year was $25 million and this year is $26.25 million, which...

ELE Ltd’s total earnings last year was $25 million and this year is $26.25 million, which is in line with its long-term earnings growth rate. There are 4 million shares outstanding, and the company follows a policy of retaining 30% of its earnings. Calculate the company’s expected dividend per share next year. Show all calculations.

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Answer #1

calculation of growth rate

=

=5%

caluculation of expected earnings for next year

=27.5625 MILLION

=6.8906

Divident payout=1-retention ratio

dividend payout=1-.3

=.7

EXPECTED DIVEND=EPS*DIVIDEND PAYOUT

EXPECTED DIVIDEND=6.8906*.7

=4.8234

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