Assume that Daisy Brown has a sole income from Fantasy Ltd in which she owns 15% of the ordinary share capital. Currently, she has no savings.
In February, 2018, Fantasy Ltd reported net profits after tax of $600,000, and announced it expects net profits after tax for the current calendar year, 2018, to be 30% higher than last year’s figure. The company operates with a dividend payout ratio of 75%, which it plans to continue, and will pay the annual dividend for 2017 in late-May, 2018, and the dividend for 2018 in late-May, 2019.
In late-May, 2019, Daisy wishes to spend $100,000, which will include the cost of an overseas trip. How much can she consume in late-May, 2018 if the capital market offers an interest rate of 10% per year?