--%>
Assignment Help - homework help

Problem on EBIT

ABC Corporation stock sells at $27 per share and its dividend per share is $1.20. ABC has price-earnings ratio of 16. The company contains $40 million worth of bonds, selling at par, with 8.5% coupon. The EBIT of ABC is of $12 million and its tax rate is 30%. Calculate: (i) the dividend payout ratio, (ii) the total number of shares, and (iii) the total value of ABC.

E

Expert

Verified

Given,

119_ABC.jpg

Price-earnings ratio = price per share/EPS = 16

27/EPS = 16
EPS = $1.6875

Dividend payout ratio = DPS/EPS = 1.2/1.6875 = 0.7111 = 71.11%

Value of equity = 3.5674*$27 = 96.32 million

Value of debt = 40 million

Total value of Tafton = $136.32 million

Thus the dividend payout ratio is 71.11%, the total number of shares is 3.5674 million and the total value of AB is $136.32 million.

   Related Questions in Corporate Finance

  • Q : FIN3000 Corporate Finance Task

    Task Description Length: 1000-2000 words (up to 500 words above 2000 permitted) Description: • Complete this assignment in groups of 4-5 students. • Maintain a portfolio of financial issues taken from 8 news sources. • Analyse the articles with reference to theory covered in class and h

    		•
  • Q : Data Case Please assist with the

    Please assist with the attached Data Case assignment

    		•
  • Q : In which cases use different WACCs Is

    Is this possible to use different WACCs within order to discount each year’s flows? In which cases?

    		•
  • Q : How form a portfolio with higher

    Does this make any sense to form a portfolio comprised of companies along with a higher return/dividend?

    		•
  • Q : Who explained the high-peak/fat-tails

    Who explained the high-peak/fat-tails?

    		•
  • Q : Bond price problem ABC Corp is issuing

    ABC Corp is issuing a 10-year bond with a coupon rate of 7 %. The interest rate for similar bonds is at present 9 %. Supposing annual payments, what is the current value of the bond? (Round to the closest dollar.) (a) $872 (b) $1,066 (c) $990 (d) $945.

    Q : Widgets You are required to submit a

    You are required to submit a bid to supply 200,000,000 widgets per year to the State of Illinois for the next five years. Your company has an idle tract of real estate that cost $1,500,000 ten years ago; if your company sold the land today, it would generate $3,000,000 after the taxes were paid. The

    		•
  • Q : Define Cash to cash cycle Cash to cash

    Cash to cash cycle: The concept of cash to cash cycle is financial performance standard, which is associated with the management of a firm’s working capital. The definition of cash to cash or cash conversion cycle is “the length of time a

    		•
  • Q : Problem on annual obligation payment

    ABC Corp. has a challenge: The CEO wants to set aside annual, end of year payments into a sinking fund account earning 5% over the next 6 years in order to retire $25 million in bonds that will be outstanding at that time. Determine the annual payment required each ye

    		•
  • Q : What is Regular meeting of day-to-day

    Regular meeting of day-to-day commitments: The estimation of WCR also helps to ensure that there is positive WC existence. This proves helpful in meeting requirements which are regular in nature such as payments of salaries, wages, rental charges etc.

    		•