Capital structure of Sun Ltd., as at 31.03.2003 was under:ParticularsEquity share capital8% Preference share capital12% DebenturesReservesRs.In.lacs80406432Sun Ltd., earns a profit of Rs.32Lakhs annually on a average before deduction ofincome-tax which works out to 35% and interest on debentures.Normal return on equity shares of companies similarly placed is-9.6% provided:Profit after tax covers fixed interest and fixed dividends at least 3 times.Capital gearing ratio 0.75.Yield on share is calculated at 50% pf profits distributed and at 5% onundistributed profits.Sun Ltd., has been regularly paying equity dividend of 8%.Compute the value per equity share of the company.

The capital gearing ratio compares the owner’s equity to the long-term funds borrowed by the…

Answered: Capital structure of Sun Ltd., as at…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $43,000 for the current period. Assuming a flat ordinary tax rate of 21%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $12,100 in interest. b. The firm pays $12,100 in preferred stock dividends. a. Complete the fragment of Michaels Corporation's income statement below to compute the firm's earnings after taxes and earnings available for common stockholders under condition (a). (Round to the nearest dollar.) EBIT Less: Interest expense Earnings before taxes Less: Taxes (21%) Earnings after taxes Less: Preferred dividends Earnings available for common stockholders $ LA $ $ $
Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $48,000 for the current period. Assuming a flat ordinary tax rate of 27%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $13,000 in interest. b. The firm pays $13,000 in preferred stock dividends. a. Complete the fragment of Michaels Corporation's income statement below to compute the firm's earnings after taxes and earnings available for common stockholders under condition (a) (Round to the nearest dollar) EBIT $ Less: Interest expense Earnings before taxes $ Less: Taxes (27%) Earnings after taxes $ Less: Preferred dividends Earnings available for common stockholders
Use the following inputs and the finite horizon from of the residual income model to compute the value of Southern Trust Bank (STB) shares as of 31 December 2007: i. ROE will continue at 15% for the next five years and 10% thereafter with all earnings reinvested (no dividends paid) ii. Cost of equity is 10% iii. Beginning period book value at year-end 2007 is $10
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YTM Bond A $500 Million 100.82 4.36% Bond B $350 Million 101.36 4.49% Common Stock 42.5 Million Shares $28.21 per share E(R ) Market = 8.65% β = 1.27 Expected Dividend = $1.95 Rf = 2.10% Growth Rate = 2.75% Given this information, if the tax rate of the firm is 30%, what is the after-tax cost of debt?
ni Score: 0 of 1 pt 8 of 10 (9 complete) HW Score: 48.67%, 4.87 of 10 pts P7-15 (similar to) Question Help ▼ Common stock value-Variable growth Lawrence Industries' most recent annual dividend was $2.48 per share (Do = $2.48), and the firm's required return is 11%. Find the market value of Lawrence's shares when dividends are expected to grow at 15% annually for 3 years, followed by a 6% constant annual growth rate in years 4 to infinity. The market value of Lawrence's shares is $ (Round to the nearest cent.) kt Librai Iculat source Enter your answer in the answer box and then click Check Answer. udy All parts showing Clear All Check Answer ation Tools > This course (Introduction to Finance (FIN-101-D02) Distance Spring 2021) is hased on Zutter/Smart: Princinles of Managerial Brief Se pe here to search
The following financial information is available on Rawls Manufacturing Company: Current per share market price $48.00 Current per share dividend $3.50 Current per share earnings $6.00 Beta 1.1 Expected rate of return on market 12.0% Risk-free rate 6.0% Expected long-term growth rate 5.0% Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach. (Compute the answer to the nearest 0.1%.) a 12.6% b. 14.4% c.13.4% d.12.7%
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Example: What is the multi-year holding period return for this share - Initial share price was £1, (P3) was £1.20 A dividend of 6p was paid at the end of Year 1 (D₁), 7p was paid at the end of Year 2 (D₂) and 8p was paid at the end of Year 3 (D3) ● Year 0 1 2 3 3 NPV Cash flow (pence) (100) 6 7 8 120 DF @ 12% DCF DF @13% DCF
The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend Expected Capital Gain A $0 $10 B 5 5 C 10 0 Required: a. If each stock is priced at $110, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Req A Req B If each stock is priced at $110, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective…

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