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 firms equity in total and per share if the firm has 2 million shares outstanding and the rate of return for shareholders is 11.5%? (3 marks) ANSWER:

c) Golden Sand Resort Ltd, one domestic subsidy of this corporation still maintain a good performance and has a net profit for current year of $1,540,000. The company is planning to launch a project that will requires an investment of $ 845,000 next year. How much dividend Golden Sand Resort can pay its shareholders this year and what is dividend payout ratio of the company given the capital structure of 40% equity funding and 60% debt funding. Assume the Residual Dividend Payout Policy applies? (2 marks) ANSWER: