Calculate Boehm’s total dividends for 2014 under each of the following policies.

1.The total dividends for 2014 under the policy where its dividend payment is set to force dividends to grow at the long-run growth rate in earnings would be $2,737,600 calculated as follows: D = D0(1 + g) = $2.6 million(1+8%)=  $2,737,600.

2. The total dividends for 2014 under the policy of continuing the 2013 dividend payout ratio would be 3,191,200 calculated as follows: DPS2013 x NI2014 = (Dividends/Net Income) x Net Income = ($2.6 million/$9.8 million)*$12.6 million=$3,191,200.

3. Under a Pure residual policy with all distributions in form of dividends (35% debt) calculation ,the total dividends for 2014 would be 2,370 000 calculated as follows: EPS2014 + [(Investment Amount – Debt){TaxRate}]*[DPS after Expansion]  = Earnings Per Share + [($7.3million – $4million)( if we compound more often than annually since more compounding occasions offer greater opportunity for accumulation of interest.

4. The effective annual rate (EAR or EFF%) for a nominal rate of 12%, compounded semiannually is 12.735%, calculated as follows: EAR = (1 + r/2)^2 – 1 = (1+12%/2)^2 – 1= (1.06)^2 – 1= 1.12735– 1 = 0.12735, so the effective annual rate is 12.735%. Compounded quarterly, the EAR would be 12.854%; compounded monthly, the EAR would be 12.917%; and compounded daily it would be 13%.

5 . On October 1 you will have $115.48 in your account from the initial deposit of $100 on January 1 if the nominal interest rate is 11.33463% with interest added daily; this is calculated as follows: FV = PV(1 + R/n) ^ nt FV = 100(1+(11,33463%)/365) ^ 9 x 365FV=$115..48.

6 . The value of the bond described above if expected inflation rate rises by 3 percentage points and investors require a 13% return is $885, which is a discount bond; this can be calculated as follows: PV = CF/(1+r_d )^ t PV=-$100/(1+13%)10 + 1000/(1+13%)0=$885.
7 . If inflation falls and r_d declines to 7%, then we will have a premium bond with a value of $1177; this can be calculated as follows 😛 V=-$100/(1+7 % ) 10 +1000 /(11++7 % ) 0 ==$1177
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8 . The yield to maturity on a 10-year ,9% annual coupon ,$1000 par value bond that sells for $887 is 9%, calculated as follows : YTM=Interest Earned during Bond’s life /Market Price YTM=(90x 10)/887==9%. A bond selling at at discount tells us that required return or market yield exceeds coupon rate while one selling at premium implies market yield equals lower than coupon rate.

9 .The total return ,current yield and capital gain yield on the discount bond in Q#8 are given below ;Total Return= Coupon Interest payments plus Capital Gain realized upon sale of asset Total Return=(90 x10)+887-1000==787Current Yield= Coupon Interest payment / Market price Current Yield=(90×10)/887 ==10Capital Gain Realized Upon Sale Of Asset:- Appreciation Or Depreciation In Value * Market Price At Time Of Sale Capital Gain Realized Upon Sale Of Asset=-113*897 ===-1013.