JLChem Corporation, a chemical manufacturing firm with changing investment opportunities, is considering a major change in dividend policy. It currently has 50 million shares outstanding and pays an annual dividend of $2 per share. The firm current and projected income statement are provided below (in millions):
|
|
Current
|
Projected for Next Year
|
|
EBITDA
|
$1,200
|
$1,350
|
|
- Depreciation
|
$200
|
$250
|
|
EBIT
|
$1,000
|
$1,100
|
|
- Interest expense
|
$200
|
$200
|
|
EBT
|
$800
|
$900
|
|
- Taxes
|
$320
|
$360
|
|
Net income
|
$480
|
$540
|
The firm's current capital expenditure is $500 million. It is considering five projects for the next year:
|
Project
|
Investment
|
Beta
|
IRR (Using Cash Flows to Equity)
|
|
A
|
$190 mil
|
0.6
|
12.0%
|
|
B
|
$200 mil
|
0.8
|
12.0%
|
|
C
|
$200 mil
|
1.0
|
14.5%
|
|
D
|
$200 mil
|
1.2
|
15.0%
|