Q4

"Question 4" "Allocated Mark = 10 marks" The Gulf Hero is a construction firm in Bahrain. The Gulf Hero Co. needs BD 275,000 for new investment project in Diyar Al Muharaq. In FY 2020, the company has a target capital structure (D/E) of one-fourth (1/4). Due to COVID-19, the business operations of Gulf Hero Co were severely impacted. Before pandemic, the company had a net income of BD 600,000. Meanwhile, in 2020, the net income dropped by 40%! a. What is proportion of debt and equity of Gulf Hero? (2 marks) b. What is the amount of debt and equity to finance the project? (2 marks) c. What is the amount of dividend should be paid by Gulf Hero Co. in 2020? (2 marks) d. Discuss the difference between residual dividend policy (2 marks) and compromise dividend policy (2 marks)