References: Aduda. J.O.‚ Kimathi‚H. (2011). The applicability of the Constant Dividend Model for Companies Listed at the Nairobi Stock Exchange. Journal of Financial Studies & Research‚ Vol.2011. Barkarat‚ A.‚& Samhan‚ H. (2012). The Value of Saudi Arabia Industrial Firms Between the Modigliani-Miller’s and Gordon’s Models:
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6 Equity as at the end of 2008 financial year 6 Cost of Equity 7 Debts as at the end of 2008 financial year 7 Cost of Debt 7 Equity as per the interim result in August 2009: 8 Debt as per the interim result in August 2009: 8 INM DIVIDEND POLICY 9 FUTURE DIRECTION 12 Conclusion 13 Bibliography 14 Appendixes 15 EXECUTIVE SUMMARY Today‚ businesses are severely affected by the downturn in the economic activities and situation. The fact that nowadays most organisations find
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rate. Answer: D Explanation: A) B) C) D) Because these cash flows are risky‚ we cannot discount them using the risk-free interest rate. Diff: 1 Topic: 9.1 Stock Prices‚ Returns‚ and the Investment Horizon Skill: Conceptual 2) When discounting dividends you should use? A) the weighted average cost of capital. B) the after tax weighted average cost of capital. C) the equity cost of capital. D) the before tax cost of debt. Answer: C Explanation: A) B) C) D) Diff: 1 Topic: 9.1 Stock Prices‚ Returns
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paid-in capital. C. Companies pay dividends on their common or ordinary shares because of numerous reasons. Generally‚ dividend is viewed as interest resulted from shareholders’ investment. When companies stay profitable and have stable earning‚ dividends can send a strong message to the market about the outstanding performance of management to attract more investors. However‚ when it is determined that the cash would yield more profits by reinvestment‚ paying out dividends may not be favorable. Company
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income and $810 million of retained earnings. The previous retained earnings were $780 million. How much dividends was paid to shareholders during the year? Net Income = 50 million Retained Earnings = 810 million Retained Earnings beginning of the year = 780 million Amount of RE generated this year = 810 – 780 = 30 million NI = Dividends + RE 50 million = Dividends + 30 million Dividends= 50 – 30 = 20 million 2-7 – Corporate tax liability The Talley Corporation had a taxable income of $365
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Coursework Assignment Number 1 The Gordon Model is particularly useful since it includes the ability to price in the growth rate of dividends over the long term. It is important to remember that the price result of the Constant Dividend Growth Model assumes that the growth rate of the dividends over time will remain constant. This is a difficult assumption to accept in real life conditions‚ but knowing that the result is dependent on the growth rate allows us to conduct sensitivity analysis to
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Mini Cases: Cost of Capital Part A: Cost of Debt Mini Case 1: Cost of perpetual/Irredeemable debt Ashok Leyland issued Rs 100 Lakhs 12% debentures of Rs. 100 each. Calculate the cost of debt in each of the following cases. (Assume corporate tax rate being 40%). Case (a) If debentures are issued at par with no floatation cost. Case (b) If debentures are issued at par with 5% floatation cost. Case (c) If debentures are issued at 10% premium with 5% floatation cost. Case (d) If debentures are issued
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of expected total return using expected dividends‚ stock price and growth rate calculation of stock price using expected total return‚ expected dividends/current dividends‚ and growth rate calculation of growth rate using stock price‚ expected total return‚ expected dividends/current dividends. calculation of expected stock price using expected total return‚ expected dividends/current dividends‚ and growth rate calculation of expected dividends using stock price expected total return
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Qus4. What are the assumptions of MM approach? Ans. Assumption of the MM approach The MM approach to irrelevance of dividend is based on the following assumptions: * The capital markets are perfect and the investors behave rationally. * All information is freely available to all the investors. * There is no transaction cost. * Securities are divisible and can be split into any fraction. No investor can affect the market price. * There are no taxes and no flotation cost. * The firm
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Abstract In April 2005‚ Wm. Wrigley Jr. company announced plans to issue $3 billion of debt. The conundrum that it faced was whether it should use the funds to repurchase shares or pay dividends‚ with both options having different implications on the firm. This report provides a comprehensive analysis of the firm‚ both before and after recapitalisation‚ in order to recommend a solution. It encompasses the appropriateness of the new debt level and Wrigley’s ability to service it‚ while also considering
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