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Low-regular-and-extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 20%, its board realizes that strict adherence to that ratio would result in a fluctuating dividend and create uncertainty for the firm's stockholders. Therefore, the firm has declared a regular dividend of $0.40 per share per year with extra cash dividends to be paid when earnings justify them. Earnings per share for the last several years are as follows: . a. Calculate the payout ratio for each year on the basis of the regular $0.40 dividend and the cited EPS. b. Calculate the difference between the regular $0.40 dividend and a 20% payout for each year. c. Bennett has established a policy of paying an extra dividend of $0.25 only when the difference between the regular dividend and a 20% payout amounts to $1.00 or more. In which year would an extra dividend be paid? What would be done with the "extra" earnings that are not paid out? d. The firm expects that future earnings per share will continue to fluctuate but will remain above $2.32 per share in most years. What factors should be considered in making a revisin to the amount pais as a regular dividend? If the firm revises the regular dividend, what new amount should it pay? a. The payout ratio for year 2010 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2011 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2012 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2013 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2014 on the basis of the regular $0.40 dividend and the cited EPS is/ %. (Round to one decimal place.) The payout ratio for year 2015 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Year 2015 2014 2013 EPS $3.18 $3.06 $2.32 Year 2012 2011 2010 EPS $3.08 $2.24 $1.96 . (Round to the nearest cent. Type a negative number to indicate a b. The difference between the regular $0.40 dividend and a 20% payout for year 2010 is $ shortfall between the current dividend and the 20% goal.) . ((Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2011 is $ between the current dividend and the 20% goal.) . (Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2012 is $ between the current dividend and the 20% goal.) . (Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2013 is $ between the current dividend and the 20% goal.) . (Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2014 is $ between the current dividend and the 20% goal.) The difference between the regular $0.40 dividend and a 20% payout for year 2015 is $ . (Round to the nearest cent. Type a negative number to indicate a shortfall c. Bennett has established a policy of paying an extra dividend only when the difference between the regular dividend and a 20% payout amounts to $1.00 or more. In which year would an extra dividend be paid? What would be done with the "extra" earnings that are not paid out? (Select the best answer below.) O A. An extra dividend would be paid in 2014 and 2012. The extra cash can be used for additional investment by placing the funds in a short-term investment account. OB. An extra dividend would be paid in all the years. O C. An extra dividend would be paid in none of the years. The extra cash can be used for additional investment by placing the funds in a short-term investment account. OD. An extra dividend would be paid in 2015 and 2013. The extra cash can be used for additional investment by placing the funds in a short-term investment account. d. The firm expects that future earnings per share will continue to fluctuate but will remain above $2.32 per share in most years. If the firm revises the regular dividend, what new amount should it pay? (Select the best answer below.) O A. The firm should increase the regular dividend to $0.79. O B. The firm should increase the regular dividend to $0.43. OC. The firm should increase the regular dividend to $0.46. OD. The firm should increase the regular dividend to $0.95. Low-regular-and-extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 20%, its board realizes that strict adherence to that ratio would result in a fluctuating dividend and create uncertainty for the firm's stockholders. Therefore, the firm has declared a regular dividend of $0.40 per share per year with extra cash dividends to be paid when earnings justify them. Earnings per share for the last several years are as follows: . a. Calculate the payout ratio for each year on the basis of the regular $0.40 dividend and the cited EPS. b. Calculate the difference between the regular $0.40 dividend and a 20% payout for each year. c. Bennett has established a policy of paying an extra dividend of $0.25 only when the difference between the regular dividend and a 20% payout amounts to $1.00 or more. In which year would an extra dividend be paid? What would be done with the "extra" earnings that are not paid out? d. The firm expects that future earnings per share will continue to fluctuate but will remain above $2.32 per share in most years. What factors should be considered in making a revisin to the amount pais as a regular dividend? If the firm revises the regular dividend, what new amount should it pay? a. The payout ratio for year 2010 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2011 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2012 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2013 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) The payout ratio for year 2014 on the basis of the regular $0.40 dividend and the cited EPS is/ %. (Round to one decimal place.) The payout ratio for year 2015 on the basis of the regular $0.40 dividend and the cited EPS is %. (Round to one decimal place.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Year 2015 2014 2013 EPS $3.18 $3.06 $2.32 Year 2012 2011 2010 EPS $3.08 $2.24 $1.96 . (Round to the nearest cent. Type a negative number to indicate a b. The difference between the regular $0.40 dividend and a 20% payout for year 2010 is $ shortfall between the current dividend and the 20% goal.) . ((Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2011 is $ between the current dividend and the 20% goal.) . (Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2012 is $ between the current dividend and the 20% goal.) . (Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2013 is $ between the current dividend and the 20% goal.) . (Round to the nearest cent. Type a negative number to indicate a shortfall The difference between the regular $0.40 dividend and a 20% payout for year 2014 is $ between the current dividend and the 20% goal.) The difference between the regular $0.40 dividend and a 20% payout for year 2015 is $ . (Round to the nearest cent. Type a negative number to indicate a shortfall c. Bennett has established a policy of paying an extra dividend only when the difference between the regular dividend and a 20% payout amounts to $1.00 or more. In which year would an extra dividend be paid? What would be done with the "extra" earnings that are not paid out? (Select the best answer below.) O A. An extra dividend would be paid in 2014 and 2012. The extra cash can be used for additional investment by placing the funds in a short-term investment account. OB. An extra dividend would be paid in all the years. O C. An extra dividend would be paid in none of the years. The extra cash can be used for additional investment by placing the funds in a short-term investment account. OD. An extra dividend would be paid in 2015 and 2013. The extra cash can be used for additional investment by placing the funds in a short-term investment account. d. The firm expects that future earnings per share will continue to fluctuate but will remain above $2.32 per share in most years. If the firm revises the regular dividend, what new amount should it pay? (Select the best answer below.) O A. The firm should increase the regular dividend to $0.79. O B. The firm should increase the regular dividend to $0.43. OC. The firm should increase the regular dividend to $0.46. OD. The firm should increase the regular dividend to $0.95

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