A company has determined that its optimal capital structure: of 40% debt and 60% equity. The firm forecasted that it will not have enough retained earnings to fund the equity portion of its capital structure. As of today this company has an outstanding shares of 10,000. The following are data collected by the firm whose net income is P40,000 and stock price is P25: • Cost of debt = 8%. • Payout ratio = 50%. • Tax rate = 40%. • Flotation cost on additional equity = 15%. • Growth rate = 0%. How much is the dividends paid per outstanding shares?
A company has determined that its optimal capital structure: of 40% debt and 60% equity. The firm forecasted that it will not have enough retained earnings to fund the equity portion of its capital structure. As of today this company has an outstanding shares of 10,000. The following are data collected by the firm whose net income is P40,000 and stock price is P25: • Cost of debt = 8%. • Payout ratio = 50%. • Tax rate = 40%. • Flotation cost on additional equity = 15%. • Growth rate = 0%. How much is the dividends paid per outstanding shares?
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 7P
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A company has determined that its optimal capital structure: of 40% debt and 60% equity. The firm
• Cost of debt = 8%.
• Payout ratio = 50%.
• Tax rate = 40%.
• Flotation
• Growth rate = 0%.
How much is the dividends paid per outstanding shares?
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