Please provide the solutions and the correct answers. thank you! 2. The Delta Company projects the following for the upcoming year: Earnings before interest and taxes = P40 million Interest expense = P 5 million Preferred stock dividends = P 4 million Common stock dividend payout ratio = 20% Average number of common shares outstanding = 2 million Effective corporate income tax rate = 40% The expected dividend per share of common stock is a. P1.70 b. P1.86 c. P2.10 d. P1.00
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
Please provide the solutions and the correct answers. thank you!
2. The Delta Company projects the following for the upcoming year:
Earnings before interest and taxes = P40 million
Interest expense = P 5 million
Common stock dividend payout ratio = 20%
Average number of common shares outstanding = 2 million
Effective corporate income tax rate = 40%
The expected dividend per share of common stock is
a. P1.70
b. P1.86
c. P2.10
d. P1.00
3. Following are selected data taken from the records of Jemson Company:
Income before tax = P200,000
Income tax rate = 40%
Dividend payout ratio = 0.80
Number of common shares outstanding = 10,000 shares
How much dividends per share did the company pay during the year?
a. P9.60
b. P6.40
c. P16
d. P15
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