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Corporate finance assignment: Question Based on Financial Analysis

6 a. Compute ex-dividend price The ex-dividend date is the future date which intends to the existing as well as potential shareholders of the business those dividends which was declared by the company against the stock shall be paid to the respective shareholders (Mortalet al., 2017). They are allowed to claim only on the ex-dividend date and after that the shareholders shall not be entitled to receive the said amount of dividend. Ex-dividend is one business date which is the day before the final declaration of dividend or the record date wherein the company counts the number of shareholders and their independent holdings based on company’s records. On the other hand, ex-dividend means the stock that is trading without knowing the value of the future dividend payment (Ngocand Cuong, 2016). The ex-dividend is the day when the stock starts its trading business without knowing the value of the future dividend payment. Prospective investors purchase new stock at a premium to avail the dividend before stock is declared as ex-dividend. Ex-dividend price is the price for tomorrow morning which is determined as ex-dividend price less after tax valuation of the declared dividend. Ex-dividend price = Current market value – after tax value of dividends declared (both) = 22-((4.5+1.5)*(1-0.25%)) = $17.5 per share b. Compute dividend payout ratio Net profit for the year = $2575000 Less: Equity shares of CAPEX = 74500*0.60 = $447000 Net income available to be distributed among the equity shareholders = $2128000 Dividend payout = $2128000/$2575000 = 82.64% c. Compute current value in total and per share Value of equity shares = 3.675/(13.5-5) = $43.235 per share Value of equity shares = 2.5 million shares * $43.235 = $108.088 million Expected dividend payment at the end of the year = 3.5*1+0.05 = 3.675 References Laktionova, O.E., Tereshchenko, E.Y. and Desyatskii, S.P., 2017. Transformation of the organization and management of small and medium-sized business' finance. Finansovayaanalitika: problem I resheniya= Financial Analytics: Science and Experience, 10(7), pp.767-789. Mortal, S., Paudel, S. and Silveri, S., 2017.The impact of market structure on ex?dividend day stock price behavior. Financial Management, 46(4), pp.1053-1082. Ngoc, D.B. and Cuong, N.C., 2016. Dividend announcement and ex-dividend effects on stock return. International Journal of Economics and Finance, 8(7), pp.207-215.


Subject Name: Finance

Level: Undergraduate


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