Question 2 SECTION 2: Choose two (2) questions from this section (i)Briefly identify and discuss three types of dividend payout policies that may be used (8 marks) by a company and explain M&M dividend irrelevance theory. (ii) Mars company has $1000 in earnings and $900 in planned capital spending. The company has a target D/E ratio of 0.5. If the company reinvests all its earnings, its equity will increase by $1,000. The company must borrow an additional $500 to maintain its target capital structure. Without selling new equity, the amount of funds that can be generated is $1,500. The firm intends to pay dividends since planned capital spending is less than the total amount of capital. Required: a. what type of dividend policy is Mars most likely pursuing? y (2 marks) 3 b. To maintain the target capital structure, show how the planned capital spending will be funded and how much will be available for dividends. (5 marks)

Question No 3   (part i)        (remaining part)                                                                   Answer the following. i) The future earnings, dividends, and common stock price of Nabeel Inc. are expected to grow 7% per year. Common stock currently sells for $23.00 per share; its last dividend was $2.00. d) If you have equal confidence in the inputs used for the three approaches, what is your estimate of cost of common equity?

Stockholder Payout Rations Super Duper Corporation had a string of successful years. Super Dupers executives wish to examine how its stockholders have been compensated for their contributed capital. The following information pertains to Super Duper Corporation: Required: Calculate the dividend yield, dividend payout, and total payout.

Quiz 2: Solvency Debt-to-equity ratio Times interest earned ratio Debt service coverage ratio Cash flow from operations to capital expenditures ratio Profitability Return on assets ratio Return on sales ratio Asset turnover ratio Return on common stockholders equity ratio Leverage Earnings per share (EPS) Price/earnings (P/E) ratio Dividend payout ratio Dividend yield ratio A measure of a companys success in earning a return for the common stockholders. The relationship between a companys performance according to the income statement and its performance in the stock market. The ability of a company to remain in business over the long term. A variation of the profit margin ratio; measures earnings before payments to creditors. A companys bottom line stated on a per-share basis. The percentage of earnings paid out as dividends. The ratio of total liabilities to total stockholders equity. A measure of the ability of a company to finance long-term asset acquisitions with cash from operations. A measure of a companys success in earning a return for all providers of capital. The relationship between net sales and average total assets. The relationship between dividends and the market price of a companys stock. The use of borrowed funds and amounts contributed by preferred stockholders to earn an overall return higher than the cost of these funds. An income statement measure of the ability of a company to meet its interest payments. A statement of cash flows measure of the ability of a company to meet its interest and principal payments. How well management is using company resources to earn a return on the funds invested by various groups.

May I ask for a solution and explanation to the problem for a better understanding. Thank you! For Lettuce Company what is the dividend pay-out ratio for years 1 and 2, respectively? a. 0.80 ; 0.71 b. 0.71 ; 0.80 c. 0.90 ; 0.85 d. 0.85 ; 0.90

The discounted cash flow model and the corporate valuation model are the most widely used valuation techniques. Often these valuations are accompanied by market multiple analysis, which is based on the fundamental concept that sinar assets should have simlar values. Carlson Co, is a privately owned firm with few investors. Investors forecast their eamings per share (EPS) to reach $3 this coming year The average price-to-earnings (P/E) ratio for similar companies in the S&P 500 is 11. The estimated intrinsic value of Carlson Co.'s stock will be Market multiple analysis is also used to calculate the value of a company, which is further used to calculate the intrinsic vakre per share of the fim Suppose you have the information given in the following table for Company X. EBITDA Total value of equity Total firm value per share. Year 1 Year 2 $10,680 $12,375 $121,500 $112,500 $182,250 $202,500

Question 4 The following information is taken from Tanaka Bhd for the year ended 31 December 2020. Preference dividend declared and fully paid in 2020: RM100,000 Ordinary dividend declared and fully paid in 2020: RM3,960,000 Preference shares marketable price per unit at 31 December 2020: RM4.60 Ordinary share marketable price per unit at 31 December 2020: RM9.00 Required: Calculate the following ratio for 2020: Industry average ratio Profit margin 4.0% Earnings per share RM0.46 Rate of return on total assets 11.0%

A1. Payout policy (Answer all parts of this question.) (a) , What is the main theorem of Modigliani and Miller regarding the payout policy of firms? Explain. 1 (b) List four assumptions that must hold for the Modigliani-Miller theorem to be valid. (c) Consider a company that has 100 million shares outstanding. The market value of the company is currently at GBP 5 billion. Last year, the company paid out an annual dividend of GBP 2 per share. This year, the company intends to double the dividend to shareholders, but since the company has not enough cash, the company intends to raise the additional money required to pay the dividend in rights issue. i. ( If the price of a new share offered is GBP 25, what is the fair value of a right to buy a new share? Hint: The company first pays the dividends, and then raises the capital. ii. ( ) Contrary to theory, however, as soon as the company announces the rights issue, the share price drops. Why? Think of a reason why this transaction, i.e.,…

Question 1: The company capital structure consists of debt 230000 at 6.45%, preferred stock 260000 at 15.40% and common stock 170000 at 11.33%, calculate and define the company's weighted average cost of capital

The M. Smith and Family Corporation Data Shares Outstanding 25,000,000 Earnings $50,000,000 Dividends, Per Share (Just Paid) $1.25  Return on Equity 0.15 Beta 1.35     Market Data Expected Return Market Return 0.12 Risk-Free Rate 0.03     Required:   Using the information in the tables above, complete the necessary steps to calculate the P/E ratio and the PEG ratio. The M. Smith and Family Corporation Calculations Capitalization Rate   Earnings Per Share   Plowback Rate   Sustainable Growth Rate   Price   P/E Ratio   Sustainable Growth Rate (as Percentage, use for PEG Calculation) 0 PEG Ratio