Could you please explain how the answer of £50000 and £0.10 were obtained and why Efford plc has the following equity capital at the year end.(Click here to view the financial data.)In addition, the company has 400,000 £1 8% preference shares in issue.The board of directors wishes to eliminate the company's reserves. It has decided to make an immediate 1-for-2 bonus issue of ordinary shares. Following the issue,an annual dividend will be paid to shareholders.What will be the required:1. Transfer from revenue reserves to effect the bonus issue.£50,000 (Type an integer.)2. Dividend per ordinary share. (Expressed as £ per share)£ 0.10 per share (Round to two decimal places as needed.)Data table£Ordinary shares of £0.50 each200,000Share premium50,000General reserve80,00062,000Retained profits392.000

2. Dividend per ordinary shareRetained profits available: £62,000.Total ordinary shares after the…

Answered: Efford plc has the following equity…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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Efford plc has the following equity capital at the year end. (Click here to view the financial data.) In addition, the company has 400,000 £1 8% preference shares in issue. The board of directors wishes to eliminate the company's reserves. It has decided to make an immediate 1-for-2 bonus issue of ordinary shares. Following the issue, an annual dividend will be paid to shareholders. What will be the required: 1. Transfer from revenue reserves to effect the bonus issue. £50,000 (Type an integer.) 2. Dividend per ordinary share. (Expressed as £ per share) £ 0.10 per share (Round to two decimal places as needed.) Data table £ Ordinary shares of £0.50 each 200,000 Share premium 50,000 General reserve 80,000 62,000 Retained profits 392.000
Xijiang issued 1000 shares at the beginning of fiscal year (t=0), and the net profit at the end of fiscal year (t=1) is expected to be 2million won. (zhuxijiang plans to pay a total of 800000 won as dividends to shareholders at the end of the accounting year, and the rest will be retained for internal reinvestment. (Zhou) the average self capital profit margin (roe= current net profit of the accounting year / self capital at the beginning of the accounting year) of Xijiang in each accounting year will be maintained at 20%. (shares) Xijiang's dividend policy and self capital profit margin will continue to be maintained. The annual required rate of return (RRR) of the enterprise in the market is 16%. If the dividend growth rate (or profit growth rate) of the company is equal to the return on self capital (ROE) multiplied by the internal retention rate, please answer the following questions. The dividend discount model is used to calculate the stock price at the beginning of the…
Lexbel plc generates earnings after tax (PAT) of 20% on shareholders’ funds. Its current capital structure is as follows: Ordinary shares of 50p each £300,000 Reserves £400,000 Total: £700,000 The board of Lexbel plc wishes to raise £180,000 from a rights issue in order to expand existing operations. Its return on shareholders’ funds will be unchanged. The current ex-dividend market price of Lexbel plc is £1.90. Three different rights issue prices have been suggested by the finance director: £1.80, £1.60 and£1.40. Determine the form of the issue for each rights issue price
Lexbel plc generates earnings after tax (PAT) of 20% on shareholders’ funds. Its current capital structure is as follows: Ordinary shares of 50p each £300,000 Reserves £400,000 Total: £700,000 The board of Lexbel plc wishes to raise £180,000 from a rights issue in order to expand existing operations. Its return on shareholders’ funds will be unchanged. The current ex-dividend market price of Lexbel plc is £1.90. Three different rights issue prices have been suggested by the finance director: £1.80, £1.60 and£1.40.Present your results in a tabular form and critically evaluate the best option among the three right issues
You have been appointed as a financial consultant by the directors of Sizonke Holdings. They require you to determine the cost of capital of the company. The following information is available on the capital structure of the company: ✓ 1 500 000 ordinary shares, with a market price of R3 per share. The latest dividend declared was 85 cents per share. A dividend growth of 14% was maintained for the past 5 years. ✓ 1 000 000 11%, R1 preference shares, with a market value of R2 per share. ✓ R1 000 000 9%, debentures due in 7 years and the current yield-to-maturity is 10%. ✓ R700 000 14%, bank loan, due in December 2019. Additional information: - The company has a tax rate of 28%. - The beta of the company is 1.6, a risk free rate of 6% and the return on the market is 15%. 2.1 Calculate the weighted average cost of capital. Use the Gordon Growth Model to calculate the cost of equity. 2.2 Calculate the cost of equity, using the Capital Asset Pricing Model.
The directors of Temu Limited have appointed you as their financial consultant. They are considering new investment projects and need you to calculate the cost of capital for the company.The present capital structure and additional information for Temu Limited is as follows:• 3 000 000 ordinary shares with a par value of 85 cents per share. These shares are currently trading at R5.50 per share and the latest dividend paid is 40 cents. An average dividend growth of 14% is maintained.• 600 000 15% R4.00 preference shares, with a market value of R6.00 per share.•R6 000 000 non-distributable reserves• R2 200 000 8% debentures due in 6 years’ time and the current yield-to-maturity is 6%, and• R900 000 13% bank loan.• The company has a beta of 1.8, a risk-free rate of 6% and enjoys a market risk premium of 9%. Market risk premium is the additional return that investors expect to earn from a market portfolio compared to a risk-free investment. Therefore, it is the difference between the…
(a) Josef Robien CFA is valuing the common stock of British Cornuopia Bank (BCB). In this effort, Robien has made the following assumptions • EPS will be 20% of the beginning book value per share for each of the next 3 years • Book value per share is estimated at $10.62 on December 31, 2013 • BCB will pay cash dividends equal to 40% of earnings per share (EPS) • At the end of 3 years, BCB’s common stock will trade at 4 times its book value • Beta for BCB is 0.7, the risk free rate is 4.5% and the equity risk premium is 5% Calculate the value per share of BCB stock using the Residual Income Model .
Evergreen Company has the choice of raising the additional sum of Rs. 50 lacs either by the sale of 10 % percent debentures, or by issue of additional equity shares of Rs. 50 per share. structure of the company consists of 10 lacs ordinary shares and no debt. At what level of earnings before interest and tax (EBIT) after the new capital is acquired would earnings per share (EPS ) be the same, whether new funds are raised by issuing ordinary shares or by issuing debentures Assume 50% tax rate. The current Capitalization
PLEASE START FROM SECTION B Use the following information about SV Inc. to calculate the company’s Cost of Capital. The stock of SV Inc. sells for $50, and last year’s dividend was $2.10. A flotation cost of 10% would be required to issue new common stock. SVs’ preferred stock pays a dividend of $3.30 per share, and new preferred could be sold at a price to net the company $30 per share. Security analysts are projecting that the common dividend will grow at a rate of 7% a year. The firm can issue additional long-term debt at an interest rate (or a before-tax cost) of 10%, and its marginal tax rate is 35%. The market risk premium is 6%, the risk-free rate is 6.5%, and Supreme Ventures’ beta is 0.83. In its cost-of-capital calculations, SV Inc. uses a target capital structure with 45% debt, 5% preferred stock, and 50% common equity. REQUIRED: Section A Calculate the cost of each capital component: the after-tax cost of debt the cost of preferred stock (including flotation costs)…
Sanders plc issued 50, 000 equity shares of 25p each at a premium of 50p per share. The cash received was correctly recorded but the full amount was also recorded in the equity share capital account. Which of the followings corrects this error? O A. Decrease share capital £25, 000, Increase share premium £25,000 O B. Increase share premium £25,000, Increase cash £25,000 O C. Increase share capital £25,000, Increase cash £25,000 O D. Decrease share premium £25, 000, Increase share capital £25,000 O E. Decrease share capital £37, 500, Increase share premium £37,500 OF. Decrease share capital E25, 000, Increase cash £25,000
Please show the solution. Thank you. 1. The market value of Bato Company’s ordinary shares (book value: P65M) is estimated at P60M and the market value of its interest bearing debt (book value: P35M) is estimated at P40M. The average before tax yield on these liabilities is 15% per year. Income taxes are 40%. The company is expected to pay a dividend of P10 per share and the shares are selling at a price of P100 per share. The growth rate of dividend is projected to be 2.5% per year. What is the weighted average cost of capital (WACC) of the company as a whole?
You have been appointed as a financial consultant by the directors of Chennai Holdings. They require you to calculate the cost of capital of the company. The following information is available on the capital structure of the company: • 1 500 000 Ordinary shares, with a market price of R3 per share. The latest dividend declared was 90 cents per share. A dividend growth of 13% was maintained for the past 5 years. • 1 000 000 12%, R1 Preference shares with a market value of R2 per share. • R1 000 000 Debentures due in 7 years with a current market value of R 951 356 and • a before tax cost of 10% • R900 000 14% Bank loan, due in December 2016 Additional information: 1. The company has a tax rate of 30%. 2. The beta of the company is 1.7, a risk free rate of 7% and the return on the market is 15%. Required: 1.1 Calculate the weighted average cost of capital (WACC). Use the Gorden Growth • Model to calculate the cost of equity. (17) 1.2 Calculate the cost of equity, using the Capital Asset…

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