Question
Data Ltd is a publicly traded company that finances its operations entirely with equity. The Big Data PLC has 200,000 outstanding ordinary shares and it
Data Ltd is a publicly traded company that finances its operations entirely with equity. The Big Data PLC has 200,000 outstanding ordinary shares and it is expected to generate $ 800,000 of total profits each year for the foreseeable future. Required return on equity and required return on assets computed as 10%.
a) Calculate the companys value?
b) Determine the companys share price?
c) Calculate companys Earnings per share (EPS) and Return on Equity (ROE) value.
d) The chief financial officer (CFO) of Big Data Ltd has proposed following capital structure to improve the current performance of the business. Determine the New Earnings per share (EPS) and Return on Equity (ROE) value under the proposed structure. Do you recommend the proposed plan of CFO?
| Total assets | $6,000,000 |
| Equity | $3,000,000 |
| Debt | $3,000,000 |
| Shares outstanding | 200,000 |
| Share Price | $60 |
| Interest rate on debt | 6% |
| Assumed EBIT | $1,500,000 |
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Industrial Organizational Psychology An Applied Approach
Authors: Michael Aamodt
7th Edition
1111839972, 9781111839970
