Panyaroad Plc has just paid a dividend of USD 8 per share. The market value of share is USD 93. The following has beenextracted from the Statement of Financial Position of Panyaroad Plc.USDOrdinary share capital 10,000@50Retained Earnings500,000250,00012% Redeemable debenture 1000@100100,000TOTAL (USD)850,000The market value of debenture is USD 95, redeemable three year from now. Dividend paid in previous yea is shownbelow:Year123Dividend Paid5.455.906.007.257.408.00The company is in a 35% tax bracketRequired:i.Use divided valuation model to obtain the cost of equityii.Calculate after tax cost of debtiii.Calculate Weighted Cost of Capital (WACC) using market value weights.The above company wishes to raise an additional USD 100,000 to invest in a project which would produce USD20,000 per annum indefinitely.iv.If the company's capital structure is considered optimal, should the company undertake this project?If the USD 100,000 is to be raised by issuing more ordinary shares, is WACC appropriate discount rate?а.b.

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Answered: Panyaroad Plc has just paid a dividend…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 7P

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During 20X2, Norton Company had the following transactions: a. Cash dividends of 20,000 were paid. b. Equipment was sold for 9,600. It had an original cost of 36,000 and a book value of 18,000. The loss is included in operating expenses. c. Land with a fair market value of 50,000 was acquired by issuing common stock with a par value of 12,000. d. One thousand shares of preferred stock (no par) were sold for 14 per share. Norton provided the following income statement (for 20X2) and comparative balance sheets: Required: Prepare a worksheet for Norton Company.
During 20X2, Evans Company had the following transactions: a. Cash dividends of 6,000 were paid. b. Equipment was sold for 2,880. It had an original cost of 10,800 and a book value of 5,400. The loss is included in operating expenses. c. Land with a fair market value of 15,000 was acquired by issuing common stock with a par value of 3,600. d. One thousand shares of preferred stock (no par) were sold for 4.20 per share. Evans provided the following income statement (for 20X2) and comparative balance sheets: Required: Prepare a worksheet for Evans Company.
Rebert Inc. showed the following balances for last year: Reberts net income for last year was 3,182,000. Refer to the information for Rebert Inc. above. Also, assume that the market price per share for Rebert is 51.50. Required: 1. Compute the dollar amount of preferred dividends. 2. Compute the number of common shares. 3. Compute earnings per share. (Note: Round to two decimals.) 4. Compute the price-earnings ratio. (Note: Round to the nearest whole number.)
Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?
Adiminus Inc had sales of R15 million, a net profit margin of 8%, total assets of R20 million, retained earnings for the year ended 31st December 2021 of R345 000 and paid out cash dividends of R300 000 to ordinary shareholders. The company had total equity of R8 million and 250,000 shares in issue. Calculate the firm’s: a) EPS b) Dividends per share c) Market to book ratio, if each share of the firm sells for R95
ABC Corporation reported a profit of P7,500,000 as of December 31, 2022. The company has the following share capital outstanding: Ordinary share capital, P10 par, 5,000,000 shares P30,000,000 10% Convertible, Non-Cumulative Preference share capital, P70 par, 500.000 shares 10,500,000 10% Cumulative Preference share capital, P30 par, 500.000 shares 12,000,000 What is this year's Earnings per share?
Vespa, PLC has 63,000 shares outstanding. If the market capitalization of the company is $315,000, how much does each share cost? 315,000 / 63,000 = 34
The following information applies to RTC Logistics Ltd.: Operating income (EBIT)= $300,000Shares outstanding = 120,000 sharesDebt = $100,000EPS = $1.45Interest expense = $10,000Stock price = $17.40Tax rate = 40% The company is considering recapitalization where it would issue $348,000 worth of new debt and use the proceeds to buy back $348,000 worth of common stock. The buyback will be undertaken at the pre-recapitalization share price of $17.40 per share. The recapitalization is not expected to have an effect on operating income or the tax rate. After the recapitalization, the company’s total interest expense will be $50,000.Number of shares bought back = 348,000/17.40 = 20,000 shares. Assume that the recapitalization has no effect on the company’s price earnings (P/E) ratio. What is the expected price of the company’s stock following the recapitalization? Should RTC proceed with the recapitalisation exercise? Explain.
On January 1, 2021, Eugene Co. had retained earnings of P1,240,000. During 2021, the co. earned net income of P456,000. The following transactions occurred:a. Cash dividends of P12 per share on 42,000 shares of ordinary shares were declared and paid.b. A small share dividend was declared and issued. The dividend consisted of 6,620 shares of P25 par ordinary share. On the date of declaration, the market price of the company’s ordinary share was P34 per share.c. The co. recalled and retired 12,100 shares of P50 par preferred share. The call price was P93 per share; the share had originally been issued for P80 per share. d. The Eugene discovered that it had erroneously recorded depreciation expense of P200,000 in 2019 for both financial and tax reporting. The correct depreciation for 2019 had been P275,000. This is considered a material error. Assume tax rate of 25%. The balance of retained earnings on December 31, 2021:
Atanfo LTD made a profit for the year ended 31 March 2020 of Gh 30,000. During that year ,the company paid preference dividends on 100,000. 5% preference share . In addition,an ordinary dividend of 4 pesewas per share was paid on 200,000 ordinary shares. What was the retained profit for the year ended 31 March 2020?
Edinburgh Plc has a profit after taxation and after preference dividends of £570,000. Share capital is made up of 100,000 preference shares and 200,000 ordinary shares. Edinburgh Plc’s Earnings per Share is: a) None of the above b) 285 pence c) 190 pence d) 570 pence
AB Corp had a net profit of CU400,000,000 and paid a dividend of CU200,000,000 during 19X7. AB Corp's shareholder equity as of December 31, 19X6 and December 31, 19X7 is as follows: 31 Desember 19x6 31 Desember 19x7 10% cumulative preference shares nominal Rp100,000 Rp300.000.000 300.000.000 Ordinary shares nominal Rp1,000 1.000.000.000 1.000.000.000 Additional paid-in capital 2.200.000.000 2.200.000.000 Retained earning 500.000.000 700.000.000 Shareholders' Equity 4.000.000.000 4.200.000.000 On January 2, 19X7, XY Corp purchases 400,000 shares of AB Corp common stock for CU4,000 per share and also pays CU50,000 in direct costs to acquire the investment. Required to determine (1) XY Corp's income from AB Corp in 19X7 and (2) the balance in the investment account with PT Somar as of December 31, 19X7.

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