Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(XYZ) Company expects earnings before interest and tax (EBIT) of $7,000,000, for the coming year. The firm`s capital structure consists of 35% debt and 65%
(XYZ) Company expects earnings before interest and tax (EBIT) of $7,000,000, for the coming year. The firm`s capital structure consists of 35% debt and 65% equity, and its marginal tax rate is 35%. The cost of equity is 14%, and the company pays 9% rate on its$3,000,000 long-term debt. The common stock outstanding is 2,000,000 shares. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $2,000,000, and it will fund this project in accordance with its target capital structure. If the firm follows a residual dividend policy and has no other project what its expected dividend payout ratio (DPR)? What its dividend per share (DPS)? What its earnings per share (EPS)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started