Coppell Timber Company had total earnings last
1. Coppell Timber Company had total earnings last year of $5,000,000, but expects totalearnings to drop to $4,750,000 this year because of a slump in the housing industry. Thereare currently 1,000,000 shares of common stock outstanding. The company has $4,000,000worth of investments to undertake this year. The company finances 40 percent of itsinvestments with debt and 60 percent with equity capital. The company paid $3.00 per sharein dividends last year.a. If the company follows a pure residual dividend policy, how large a dividend will eachshareholder receive this year?b. If the company maintains a constant dividend payout ratio each year, how large a dividendwill each shareholder receive this year?c. If the company follows a constant dollar dividend policy, how large a dividend will eachshareholder receive this year?
