You are working for Heavy Industry Exports Group. Your corporation is going to pay an annual dividend of $8 per share and extra dividend of $2.5 per share in 4 weeks. The company’s stock is currently listed and actively traded on ASX. Equipment. Ltd is a subsidiary of Heavy Industry Exports Group and currently under the liquidation plan due to the severe contraction of operation due to corona virus. The company plans to pay total dividend of $4.5 million now and $ 9.5 million one year from now as a liquidating dividend. Required: 1) Calculate the current value of the Equipment Ltd’s equity in total and per share if the firm has 2.5 million shares outstanding. The required rate of return for shareholders is 12%.
You are working for Heavy Industry Exports Group. Your corporation is going to pay an annual dividend of $8 per share and extra dividend of $2.5 per share in 4 weeks. The company’s stock is currently listed and actively traded on ASX.
Equipment. Ltd is a subsidiary of Heavy Industry Exports Group and currently under the liquidation plan due to the severe contraction of operation due to corona virus. The company plans to pay total dividend of $4.5 million now and $ 9.5 million one year from now as a liquidating dividend.
Required:
1) Calculate the current value of the Equipment Ltd’s equity in total and per share if the firm has 2.5 million shares outstanding. The required
Value of equity = present value of future dividends
PV = C/(1+r)N
Where ,
C = dividends
r = rate required =12%
N = time
Therefore,
Value of equipment ltd. = 4.5 m/1.120 + 9.5m/1.121 = $12.982 million
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