Builder, Inc. is a distributor of tools and building supplies. Management for the company has developed the following forecasts of net income:
Management expects net income to grow at a rate of 7 percent per year after 2010 and the company's cost of equity capital is 14%. Management has set a dividend payout ratio equal to 25% of net income and plans to continue this policy. Builder's common shareholders' equity at January 1, 2006 is $544,902.
Required:

Question

Builder, Inc. is a distributor of tools and building supplies. Management for the company has developed the following forecasts of net income:
  Management expects net income to grow at a rate of 7 percent per year after 2010 and the company's cost of equity capital is 14%. Management has set a dividend payout ratio equal to 25% of net income and plans to continue this policy. Builder's common shareholders' equity at January 1, 2006 is $544,902.
Required:

Quizplus · Accepted Answer

The Answer of Builder, Inc. is a distributor of tools and building supplies. Management for the company has developed the following forecasts of net income:
  Management expects net income to grow at a rate of 7 percent per year after 2010 and the company's cost of equity capital is 14%. Management has set a dividend payout ratio equal to 25% of net income and plans to continue this policy. Builder's common shareholders' equity at January 1, 2006 is $544,902.
Required: