OVNI Ltd. Capital consists of : equity (1,500 common shares) for a total value of $1,500,000. On its B/S, liabilities are for the value of $600,000. Part of the liabilities are bonds issued for a face value of $350,000 consisting of 1,000 bonds issued. The yearly coupon is 10%. Shareholders are expected to receive an annual dividend of 5% per year. The company is operating under normal conditions with a yearly income (EBIT) of $ 100,000. Calculate the WACC for OVNI? Disregard corporate Tax. How can capital structure of the company influences its risk profile, if cash flows for one year are set to $ 100,000 according to profit & loss account? What is the value of the total balance sheet?
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
OVNI Ltd. Capital consists of : equity (1,500 common shares) for a total value of $1,500,000. On its B/S, liabilities are for the value of $600,000. Part of the liabilities are bonds issued for a face value of $350,000 consisting of 1,000 bonds issued. The yearly coupon is 10%. Shareholders are expected to receive an annual dividend of 5% per year. The company is operating under normal conditions with a yearly income (EBIT) of $ 100,000.
- Calculate the WACC for OVNI? Disregard corporate Tax.
- How can capital structure of the company influences its risk profile, if
cash flows for one year are set to $ 100,000 according to profit & loss account? - What is the value of the total
balance sheet ? - Calculate the EPS (earning per share) under recession of 10%?
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