Alternative dividend policies Given the earnings per share over the period 20082015 shown in the following table, determine the annual dividend per share under each of the policies set forth in parts a through d.

Year	Earnings per share
2015	$1.40
2014	1.56
2013	1.20
2012	-0.85
2011	1.05
2010	0.60
2009	1.00
2008	0.44

b. Pay$0.50 per share and increase to $0.60 per share whenever earnings per share rise above$0.90 per share for two consecutive years.

Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table.

c. If the firm’s policy were to pay $0.50 per share each period except when earnings per share exceed$3.00, when an extra dividend equal to 80% of earnings beyond $3.00 would be paid, what annual dividend would the firm pay each year?

Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table.

d. Discuss the pros and cons of each dividend policy described in parts a through c.

Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table.

a. If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for each year?

Float Simon Corporation has daily cash receipts of $65,000. A recent analysis of its collections indicated that customers’ payments were in the mail an average of 2.0 days. Once received, the payments are processed in 2.0 days. After payments are deposited, it takes an average of 2.5 days for these receipts to clear the banking system.

a. How much collection float (in days) does the firm currently have?

Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table.

b. If the firm had a dividend payout of $1.00 per share, increasing by$0.10 per share whenever the dividend payout fell below 50% for two consecutive years, what annual dividend would the firm pay each year?

Lockbox system Eagle Industries believes that a lockbox system can shorten its accounts receivable collection period by 3 days. Credit sales are $3,240,000 per year, billed on a continuous basis. The firm has other equally risky investments that earn a return of 15%. The cost of the lockbox system is$9,000 per year. (Note: Assume a 365-day year.) a. What amount of cash will be made available for other uses under the lockbox system?

Explain what causes inflation. Why is it easier to predict the decade-average inflation rate than the inflation rate in a single year?

“Forecasters’ predictions of inflation are notoriously inaccurate, so their expectations of inflation cannot be rational.” Is this statement true, false, or uncertain? Explain your answer.

Zane Perelli now has $100 available to him today, which he can use to purchase two$25 polo shirts. He also had the option of investing the $100 in a risk-free US Treasury securities that would yield 9% nominal interest. Leading experts predict that inflation will average 5% over the upcoming year. Determine how many polo shirts (fractions are OK) Zane can buy at the end of a year using the information from the earlier parts. How many more or less polo shirts may Zane purchase in percentage terms at the end of a year?

Zane Perelli currently has $\$ 100$ that he can spend today on polo shirts costing $\$ 25$ each. Alternatively, he could invest the $\$ 100$ in a risk-free U.S. Treasury security that is expected to earn a $9 \%$ nominal rate of interest. The consensus forecast of leading economists is a $5 \%$ rate of inflation over the coming year. a. How many polo shirts can Zane purchase today?

Carl Foster, a trainee at an investment banking firm, is trying to get an idea of what real rate of return investors are expecting in today's marketplace. He has looked up the rate paid on $3$ month U.S. Treasury bills and found it to be $5.5 \%$. He has decided to use the rate of change in the Consumer Price Index as a proxy for the inflationary expectations of investors. That annualized rate now stands at $3 \%$. On the basis of the information that Carl has collected, what estimate can he make of the real rate of return?

Risk premiums Eleanor Burns is attempting to find the nominal rate of interest for each of two securities-A and B-issued by different firms at the same point in time. She has gathered the following data.

c. Calculate the nominal rate of interest for each security. Compare and discuss your findings.

Lyman Nurseries purchased seeds costing $25,000 with terms of 3/15 net 30 EOM on January 12. How much will the firm pay if it takes the cash discount? What is the approximate cost of giving up the cash discount, using the simplified formula?