question archive The company needs to rise $3,200,000 for research and development and is considering the following financing option: Suspend dividends for 2 years, and pay dividends of 25 cents per share from the 3rd year Increasing dividends annually by 4% per years in subsequent years Dividend in recent years have grown by 3% per year
The company needs to rise $3,200,000 for research and development and is considering the following financing option: Suspend dividends for 2 years, and pay dividends of 25 cents per share from the 3rd year Increasing dividends annually by 4% per years in subsequent years Dividend in recent years have grown by 3% per year
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The company needs to rise $3,200,000 for research and development and is considering the following financing option:
Suspend dividends for 2 years, and pay dividends of 25 cents per share from the 3rd year
Increasing dividends annually by 4% per years in subsequent years
Dividend in recent years have grown by 3% per year.
Recent Financial information:
Operating Profit:3,450,000
Interest: 200,000
Profit before taxation:3,250,000
Taxation:650,000
Profit after taxation:2,600,000
Dividends:1,600,000
Ordinary Shares (Nominal Value : 50 cents): 5,000,000
The profit tax rate paid by the company is 20% per year.
Company has cost of equity of 9% per year, which is expected to remain constant.
Option 1
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