1
2
3
4
5
6
8
9
10
15
16
17
18
19
20
21
22
23
24
25
26
Payout ratio = $120,000 /$600,000
27
28
29
30
Residual = $400,000 –$480,000
31
32
33
34
35
36
39
40
Residual = $800,000 –$480,000
Payout ratio = Dividends / Forecasted NI
Payout ratio = $320,000 /$800,000
A B C D E F G
14 Case model 12/9/2018
PART C
Equity ratio 60%
Debt ratio 40%
Required equity capital = Capital budget x Optimal equity ratio
Required equity capital = $800,000 x 60%
Residual = Forecasted NI –Required equity capital
Residual = $600,000 –$480,000
Payout ratio = Dividends / Forecasted NI
Residual = Forecasted NI –Required equity capital
Since residual < 0, there would be no dividends paid.
Residual = Forecasted NI –Required equity capital
9/12/2022 17:21
Chapter 14. Distributions to Shareholders: Dividends and Share
Repurchases
This spreadsheet model is designed to be used in conjunction with the chapter’s integrated case
and the related PowerPoint slide presentation.
(1) Assume that SSC has an $800,000 capital budget planned for the coming year. You have
determined that its present capital structure (60% equity and 40% debt) is optimal, and its net
Expected capital budget $800,000
Forecasted net income $600,000
Alternative NI forecast (1) $400,000
Alternative NI forecast (2) $800,000