--%>
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 : Explain the definition of WACC An

    An investment bank computed my WACC. The report is as: “the definition of the WACC is defined as WACC = RF + βu (RM – RF); here RF being the risk-free rate and βu the unleveraged beta and RM the market risk rate.” It is differ from what we

    		•
  • Q : Relation between book value of shares

    Is the relation in between book value of shares or capitalization a good guide to investments?

    		•
  • Q : Mm ase Study 1 You work in Walt Disney

    ase Study 1 You work in Walt Disney Company's corporate finance and treasury department and have just been assigned to the team estimating later today. You quickly realize that the information you need is readily available online. 1) Go to http://finance.yahoo.com. under " Market Summary," you will

    		•
  • Q : Does value of the company increase when

    According to the valuation method depends on tax shields, the value of the company (Vl) is the value of the unleveraged company (Vu) in addition with the value of tax shields (VTS), thus, the higher the interest and the higher the VTS. Therefore, does

    		•
  • Q : Is this possible to make money in the

    Is this possible to make money in the stock market while the quotations are going down? And what is credit sale?

    		•
  • Q : Variance of a portfolio The variance of

    The variance of a portfolio of 40 stocks will be the addition of _______ variance terms and _______ covariance terms. A) 40; 1560B) 40; 1600C) 80; 40D) 1600; 40

    		•
  • Q : What is Net Operating Profit after Tax

    What is Net Operating Profit after Tax (NOPAT)?

    		•
  • Q : Problem on price share and stock

    Brittney and Kim Wan Sun have successfully launched a successful talent agency, ABC. They expect the firm’s earnings and dividends to grow by 20% annually for the next 10 years and they establish a strong base and to grow at a constant 5% per year thereafter. AB

    		•
  • Q : Calculated Free Cash Flow I think Free

    I think Free Cash Flow (FCF) can be acquired from the Equity Cash Flow (CFac) using the relation as: FCF = CFac + Interests – ΔD. Is it true?

    		•
  • Q : Data Case Please Assist with the

    Please Assist with the attached Data Case Assignment

    		•