Question $41$

Companies usually financed their business operations with either equity capital or debt capital or both. The choice of capital employed depends on the merits or demerits of each type capital to both company and the investor $($i$.$e$.,$ existing or potential shareholders$).$ JohLex Limited issued $100,000$ ordinary shares for GHC$0\mathrm{.}80$ each and $10\%$ preference share of $40,000$ shares at $GHC1$ per share.

In $2021,$ the profit after tax was $GHC20,000.$

The management has decided to pay an ordinary dividend of $50\%$ after payment of preference dividend.

Required:

$($a$)($i$)$ Calculate the total amount of dividend payable by the company.

$(4$ marks$)$

$($ii$)$ Determine ordinary dividend per share.

$(3$ marks$)$

$($b$)$ Explain two merits and demerits each to the company for issuing equity capital.

$(4$ marks$)$

$($c$)$ Explain two merits and demerits each to the investor $($shareholder$)$ of issuing equity capital.

$(4$ marks$)$

$($Total $=15$ marks$)$