Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Answer the following parts independently of each other. a) ELL Ltds total earnings last year was $50 million and this year is $54 million, in

Answer the following parts independently of each other.

a) ELL Ltds total earnings last year was $50 million and this year is $54 million, in line with its long-term earnings growth rate. There are 15 million shares outstanding, and the company follows a policy of retaining 25% of its earnings. Based on this information, calculate the companys expected dividend per share next year. Show all calculations.

b) EMM Ltd has assets with a market value of $400 million, $60 million of which is cash. It has debt outstanding with a market value of $150 million, and 20 million shares outstanding. Assuming perfect capital markets, if the company distributes the $60 million in cash as a dividend, calculate its debt-to-equity ratio after the dividend payment. Show all calculations.

c) ENN Ltd is an all-equity financed company and currently has $300 million in excess cash. It has 200 million shares outstanding, and the current market price of each share is $15. The companys board has decided to pay out this excess cash as a one-time special dividend to shareholders. Assuming perfect capital markets, calculate the companys ex-dividend price per share. Show all calculations.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance Governance And Business Cycles Theory And International Comparisons

Authors: Robert E. Krainer

1st Edition

0444510494, 9780444510495

More Books

Students also viewed these Finance questions