Info

8.00%

8.00%

8.00%

8.00%

8.00%

Dividend Payout Ratio

33.86%

33.86%

33.86%

33.86%

33.86%

33.86%

With the higher capital expenditures and maintaining the existing dividend payout ratio of 33.86%, the debt ratio is 16.19% by the end of year 5. This is the riskiest strategy of the three, since it presupposes the existence of enough good investments (or acquisitions) to cover $ 15 billion in new investments over the next 5 years. It may, however, be the strategy that seems most attractive to management that intent on building a global entertainment empire.

All of this analysis was based upon the presumption that Disney would not be the target of a hostile acquisition. In February 2004, Comcast announced that it would try to acquire Disney. While the bid was withdrawn three months later and excess debt capacity was never cited as a reason for it, is does put pressure on the time table that Disney faces both for raising the debt ratio and improving returns on investments.

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