(Residual dividend policy) FarmCo, Inc. follows a policy of paying out cash dividends equal to the residual amount that remains after funding 60 percent of its planned capital expenditures. The firm tries to maintain a 40 percent debt and 60 percent equity capital structure and does not plan on issuing more stock in the coming year. FarmCo’s CFO has estimated that the firm will earn $12 million in the current year.
a. If the firm maintains its target financing mix and does not issue any equity next year, what is the most it could spend on capital expenditures next year given its earnings estimate?
b. If FarmCo’s capital budget for next year is $10 million, how much will the firm pay in dividends and what is the resulting dividend payout percentage?
State budgets. States that rely on sales tax for revenue to fund education, public safety, and other programs often end up with budget surpluses during economic growth periods (when people spend more
on consumer goods) and budget deficits during recessions (when people spend less on consumer goods). Fifty-one small retailers in a state with a growing economy were recently sampled. The sample showed a mean increase of $2350 in additional sales tax revenue collected per retailer compared to the previous quarter. The sample standard deviation = $425.
a) Find a 95% confidence interval for the mean increase in sales tax revenue.
b) What assumptions have you made in this inference? Do you think the appropriate conditions have been satisfied?
c) Explain what your interval means and provide an example of what it does not mean.- Voclasses