Upon consideration that coming economic situation is no longer favourable for tourism sector, Blue Ocean Corporation is preapring a liquidation plan for its international branches to preserve the shareholder values. Under the liquidation plan, the company will pay total dividend of $5 million now and $ 8 million one year from now as a liquidating dividend. A cash dividen of $2.5 was announced for this financial year.

a)Tomorrow is ex-dividend day, current market price today is $12/share. Calculate the ex-dividend price tomorrow morning. Assuming the tax on dividend is 15%? (2 marks)

ANSWER:

b)Calculate the current value of the firm's equity in total and per share if the firm has 2 million shares outstandingand the rate of return for shareholders is 11.5%? (3 marks)