Evergreen Incs most recent Statement of Financial Position is given below Evergreen Inc Statement of Financial Position As at Dec 31, 2021 Assets Cash 425,000$ Accounts Payable 300,000$ Accounts Receivable 400,000$ Inventories 500,000$ Total Current Assets1,325,000$ Net Fixed Assets18,000,000$ Total Assets19,325,000$ Liabilities Accounts Payable 300,000$ Other Current Liabilities 425,000$ Total Current Liabilities 725,000$ LT Debt 2,500,000$ Common Stock (85,000 shares o s) 4,500,000$ Retained Earnings 11,600,000$ Total Liabilities Owners Equity 19,325,000$ Additional Information Current market price per common share $ 195 Before tax cost of borrowing (secured loan) 5 Weighted Average Cost of Capital 12 Net Income for 2021 $925,000 Target D E ratio based on market values 0 25 Corporate tax rate 35 i) Suppose Evergreen uses a residual dividend policy Their capital budget for the upcoming year $1,600,000 Calculate the debt, external equity financing required and the dividends per share ii) Suppose instead, Evergreen uses a residual dividend policy Their capital budget for the upcoming year $1,100,000 Calculate the debt, external equity financing required and the dividends per share

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Posted on Sep 30, 2024

Evergreen Incs most recent Statement of Financial Position is given below. Evergreen Inc. Statement of Financial Position As at Dec 31, 2021 Assets Cash 425,000$

Evergreen Incs most recent Statement of Financial Position is given below.

Evergreen Inc. Statement of Financial Position As at Dec 31, 2021

Assets

Cash 425,000$

Accounts Payable 300,000$

Accounts Receivable 400,000$

Inventories 500,000$

Total Current Assets1,325,000$

Net Fixed Assets18,000,000$

Total Assets19,325,000$

Liabilities

Accounts Payable 300,000$

Other Current Liabilities 425,000$

Total Current Liabilities 725,000$

LT Debt 2,500,000$

Common Stock (85,000 shares o/s) 4,500,000$

Retained Earnings 11,600,000$

Total Liabilities & Owners Equity 19,325,000$

Additional Information:

Current market price per common share = $ 195
Before tax cost of borrowing (secured loan) = 5%
Weighted Average Cost of Capital =12%
Net Income for 2021 = $925,000
Target D/E ratio based on market values = 0.25
Corporate tax rate = 35%

i) Suppose Evergreen uses a residual dividend policy. Their capital budget for the upcoming year = $1,600,000. Calculate the debt, external equity financing required and the dividends per share.

ii) Suppose instead, Evergreen uses a residual dividend policy. Their capital budget for the upcoming year = $1,100,000. Calculate the debt, external equity financing required and the dividends per share.