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

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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 8P

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39. 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. The current 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 . Capitalization
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…
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The Hamilton Corporation has 4 million shares of stock outstanding and will report earnings of $6,360,000 in the current year. The company is considering the issuance of 2 million additional shares that can only be issued at $38 per share. a. Assume the Hamilton Corporation can earn 7.00 percent on the proceeds. Calculate the earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.) Earnings per share b. Should the new issue be undertaken based on earnings per share? O Yes O No Prev 1 of 10 Next >
The following is the Fine Organics Ltd. as on 31st March current year. Equity Share: 10000 Share (Rs. 100 FV each) = Rs. 10000012% Preference Share (of Rs. 100 each) = Rs. 40000010% Debentures = Rs. 600000The market price of the company’s share is Rs 110 and it is expected that a dividend of Rs 10 per share would be declared at the end of the current year. The dividend growth rate is 6 per cent.If the company is in the 35 per cent tax bracket, compute the weighted average cost of capital based on book value weights.Solve using excel
A. What amount should be reported as basic earnings per share?B. What amount should be reported as diluted earnings per share?
Gemilang Bhd has share capital of RM1 million in shares of 25 sen each. At 31 May 2022 shares had a market value of RM1.10 each. On 1 June 2022, the company makes a right issue of 1 shares for every 4 held at RM0.60 per share. Its profit were RM500,000 in 2022 and RM440,000 in 2021. The year-end is 30 November. Calculate (a) the theoretical ex-rights price; (b) the bonus issue element; (c) the basic earnings per share for 2021; and (d) the basic earnings per share for 2022.
The following information relates to Midas Ltd, a small but successful investment holdingcompany.(i) In April 2021, Midas Ltd purchased 100,000 £1.00 listed equity shares at a price of £5.00per share. Transactions costs were £5,000. At 31 December 2021, these shares weretrading at £5.30 per share. A dividend of £0.05 per share was received on 30 September2022.(ii) Midas Ltd also has an investment in a five-year bond which was purchased four yearsago.At 31 December 2021, the bond was valued at an amortised cost of £500,000 with a statedand effective interest rate of 8% (current market rates are 10%).This bond will be maturing on 31 December 2022 and Midas Ltd is expecting to receive only80% the principal but not the interest for the last year. Required(a) Show the figures relating to this investment to be included in Midas Ltd's financialstatements at 31 December 2021 on the basis that:(i) The shares were bought for trading(ii) The shares were bought as a source of dividend income and…
Lil Wayne Corporation received dividends from ordinary shares (15% interest) and preference share (25% interest) investment during the current year: A cash dividend of P100,000 from ordinary shares investment. A cash dividend of P50,000 from preference share investment. A stock dividend of 2,000 shares from ordinary shares investment when the market price was P12 per share. A property dividend costing P500,000 which had a market value of P600,000. A liquidating dividend of P5,000 from ordinary investment. How much is the total dividend income that should be reported for the current year?
WRF ltd. is reviewing three possible capital structures, I, J and K, shown in the following table. Assume a40% tax rate.Capital component Structure I Structure J Structure KCommon stock (Required return) 10,000 shares (8%) 7,500 shares (10%) 5,000 shares (16%)Preferred stock (Annual dividend rate) $60,000 (20%) $60,000 (20%) $60,000 (20%)Long-term debt (Coupon rate) $40,000 (10%) $140,000 (13%) $240,000 (18%) Using appropriate measure, describe the level of financial risk of capital structure I, J & K. Find indifference points between capital structures J & K. Find indifference point between capital structures I & J.
Orbital Logistics, Inc., will pay a dividend in one year to common shareholders of $2.75 per share, then pay a dividend of $3.00 per share at the end of year two, then pay a dividend of $2.50 at the end of year three, and a dividend of $3.10 per share at the end of year four, after which the company plans to increase the dividend by 2.5% per year thereafter. The company's weighted average cost of capital is 10.35%. Rounded to the nearest cent, the horizon value of Orbital Logistics common stock is $ Rounded to the nearest cent, the current intrinsic price per share of Orbital Logistics common stock is
The owners’ equity account for Rantuil Utilities Berhad are shown below: Common Share (RM2 par) - RM30,000Capital Surplus - RM285,000Retained earnings - RM648,100Total shareholder’s equity - RM963,100 If Rantuil Utilities Berhad currently sells for RM30 per share and a 10 percent share dividend is declared,i. Determine the number of new shares that will be distributed.ii. Reconstruct new owners’ equity account for Rantuil Utilities Berhad.