Question

(a) Describe the procedure for calculation of DPS from sales revenue .
(b) List of different models of dividend Policy.

Answer 1

(a) Describe the procedure for calculation of DPS from sales revenue .

Find sales revenue

Subtract cost of goods sold

subtract other expenses

Add other income

Subtract Depreciaition

Subtract Interest

Calculate taxes

Subtract taxes

you will get net income

find company's typical dividend payout ratio

Find number of shares outstanding

divide net income/number of shares

you will get earnings per share or eps

multiply eps by dividend payout ratio

you will get DPS

(b) List of different models of dividend Policy

1. Modigliani-Miller (M-M) Hypothesis

2. Walter’s Model

3. Gordon’s Model