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Currently, a company's EBIT ( earnings before interest and tax ) is 1 0 0 0 . The company expects a 5 % perpetual growth
Currently, a company's EBIT earnings before interest and tax is The company expects a perpetual growth rate starting from the next year. WACC is constantly and there are no taxes. Current dividend payout ratio is meaning that the firm retains of its earnings for reinvestment purposes. Now the company decides to double its dividend payout without changing investment policy reinvestment amount remains constant and raise additional shares to meet the existing reinvestment need. Current shares outstanding is Assuming no interest payment or tax expenses, calculate the following:
A Value to the firm note: based constant growth model for free cash flow to the firm marks
B Price per share after dividend payout is doubled. marks
C Dividend per share after dividend payout is doubled. marks
D Total value per share after dividend payout is doubled. marks
E If the company decides to cut dividend payout by half without changing investment policy, how much will be the total value per share after dividend is cut? marks
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