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Mambo Leo Ltd has a cost of equity of 10%. Currently the company has 250,000 shares which are quoted at the securities exchange at $120

  1. Mambo Leo Ltd has a cost of equity of 10%. Currently the company has 250,000 shares which are quoted at the securities exchange at $120 per share. The Companys earnings per share is $10 and it intends to maintain a dividend payout ratio of 50% at the end of the current financial year. The expected net income for the current year is $3 million and the available investment proposals are estimated to cost $ 6 million.

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Using the Modigliani and Miller (MM) Model, calculate the value of the firm if:

  1. Dividend is paid
  2. Dividend is not paid

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