Attis plc has reported pre-tax profits of £48 million and after-tax profits of £32 million for the year that has just ended. The business expects profits to increase by a further 25 per cent in the forthcoming year and then to stabilise at this figure. The business has 80 million £0.50 ordinary shares in issue and the market capitalisation of the business is £320 million. The dividend cover ratio of the business is held at a constant 2.5 times. what is the cost of the ordinary shares?

Attis plc has reported pre-tax profits of £48 million and after-tax profits of £32 million for the year that has just ended. The business expects profits to increase by a further 25 per cent in the forthcoming year and then to stabilise at this figure. The business has 80 million £0.50 ordinary shares in issue and the market capitalisation of the business is £320 million. The dividend cover ratio of the business is held at a constant 2.5 times. what is the cost of the ordinary shares?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 7P

See similar textbooks

Similar questions

Bayani Bakerys most recent FCF was 48 million; the FCF is expected to grow at a constant rate of 6%. The firms WACC is 12%, and it has 15 million shares of common stock outstanding. The firm has 30 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other nonoperating assets. It has 368 million in debt and 60 million in preferred stock. a. What is the value of operations? b. Immediately prior to the repurchase, what is the intrinsic value of equity? c. Immediately prior to the repurchase, what is the intrinsic stock price? d. How many shares will be repurchased? How many shares will remain after the repurchase? e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock price?
TRY Co., a company with 25% tax rate, has a free cash flow of P150,000,000 for the next year and is expected to grow at the rate of 4% constantly. The firm maintains a debt-to-equity ratio of 25%. The after-tax cost of debt and equity is 5% and 10%, respectively. Try Co. has 10,000,000 outstanding shares, and the combined market value of debt and preferred stock is P1,500,000,000. Compute for the per share intrinsic value of Try Co.
Bradfield plc’s shares have been trading at £5.00 over the last few days. The company has just reported record profits and next year profit after tax year is expected to be approximately £90 million. As the company has 100 million shares outstanding this gives an overall valuation for the company’s equity of £500 million. The company’s chairman has made it clear in a number of statements that some of the company’s growth will have to be funded externally despite its high profitability. In line with the chairman’s statements the company is to undertake a rights issue to raise £200 million to fund an investment programme that will allow the development of new markets. It is proposed to issue shares at a discount of twenty per cent, and to have the issue underwritten. A deep discount issue with new shares being offered at £2.00 was also considered by the board of directors, but it was decided to have an issue at a conventional discount. The new issue will have no impact on the expected…
Weasley plc has just paid a dividend of 15p per share. Next year’s dividend is expected to be 12% higher and thereafter dividends are expected to grow at a rate of 4% per annum. The cost of capital for Weasley is 8%. The management of the company is faced with an investment opportunity which will require dividends to be reduced to 4p per annum for the next five years. Dividends in six years will be 18p and they will then grow at 6% per annum. However, the market believes that the new investment increases the riskiness of Weasley plc with the result that the cost of equity capital rises to 9%. Using the dividend share valuation model, what will be the share price (to the nearest £0.01) with the investment opportunity (i) now and in (ii) four years’ time? a None of the above b (i) £4.01 and (ii) £4.12 c (i) £4.01 and (ii) £5.54 d (i) £4.06 and (ii) £4.12 e (i) £4.06 and (ii) £5.54
weasley plc has just paid a dividend of 15p per share. next year's dividend is expected to be 12% higher and thereafter dividends are expected to grow at a rate of 4% per annum. the cost of capital for weasley is 8%. the management of the company is faced with an investment opportunity which will require dividends to be reduced to 4p per annum for the next five years. dividends in six years will be 18p and they will then grow at 6% per annum. however, the market believes that the new investment increases the riskiness of weasley plc with the result that the cost of equity capital rises to 9%. using the dividend share valuation model, what will be the share price (to the nearest £0.01) without the investment opportunity () now and in (ii) four years' time? select an answer and submit. for keyboard navigation, use the up/down arrow keys to select an answer. a none of the above b (i) £4.20 and (ii) £4.39 (i) £4.20 and (ii) £4.91 (1) £3.75 and (ii) £4.39 (1) £3.75 and (ii) £4.91
Weasley plc has just paid a dividend of 15p per share. Next year’s dividend is expected to be 12% higher and thereafter dividends are expected to grow at a rate of 4% per annum. The cost of capital for Weasley is 8%. The management of the company is faced with an investment opportunity which will require dividends to be reduced to 4p per annum for the next five years. Dividends in six years will be 18p and they will then grow at 6% per annum. However, the market believes that the new investment increases the riskiness of Weasley plc with the result that the cost of equity capital rises to 9%. Using the dividend share valuation model, what will be the share price (to the nearest £0.01) without the investment opportunity (i) now and in (ii) four years’ time? a; 3.75 and 4.91 b none of the above c 4.20 4.39 d 4.20 4.91 e. 3.75 4.39
Breakaway wealth had net earnings of $336,000 this past year. dividends were paid of $77,280 on the company's book equity of $2,800,000. if Safeway has 175,000 shares outstanding with a current market price of $21 per share, what is the required rate of return?
The newspaper reported last week that SunRise Enterprises earned $34.19 million this year. The report also stated that the firm’s return on equity is 13 percent. The firm retains 85 percent of its earnings. What will next year's earnings be?
Alpha Plc has just paid a dividend of $5.00 per share. The company plans to increase its dividend by 10 percent next year and will then reduce the dividend growth rate by 2 percentage points per year until it reaches the industry average of 4 percent, after which the company will keep that 4 percent constant growth rate, forever. Alpha Ltd is financed by a mix of 70% equity and 30% debt, with a cost of debt of 6%. Currently, risk-free assets, in the form of long-term government bonds, provide a return of 3%. The market in which Alpha Ltd operates provides an average return of 7% and Alpha’s Ltd’s level of systematic risk is 1.2. i. Determine an appropriate discount rate to be used in valuing the share price of Alpha Ltd. Explain your choice. ii. What is the share price of Alpha Ltd.
Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $72 a share. The before-tax cost of debt is 6% and the tax rate is 34%. The target capital structure consists of 30% debt and 70% equity. What is the company's weighted average cost of capital?
AFW Industries has 196 million shares outstanding and expects earnings at the end of next year of $672 million. AFW plans to pay out 60% of its earnings in total, paying 34% as a dividend and using 26% to repurchase shares. If AFW's earnings are expected to grow by 8.9% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 11.1%. The price per share will be $____ (Round to the nearest cent.)
Tets limited is a multi- national company. The company's current year dividend is Shs.1.56 per share and is expected to grow by 3% annually.What is the approximate cost of equity (ke) if the stock is currently trading at Shs.28 a share?