What should be the dividend payout ratio in order to maximize the wealth of the shareholders?
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ABC and company has been following a dividend policy which can maximize the market value
of the firm as per Walter’s model. Accordingly, each year, at dividend time the capital budget
is renewed in conjunction with the earnings of the periods and alternative investment
opportunities for the shareholders.
In the current year, the firm expects earnings of Rs.5,00,000. is estimated that the firm can earn
Rs.1,00,000 if the profits are retained. The investors have alternative investment opportunities
that will yield them 10% return. The firm has 50,000 shares outstanding. What should be the
dividend payout ratio in order to maximize the wealth of the shareholders?
Also find out the current market price of the share.
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- Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results: Assume MARR is 20% per year. Based on an internal rate of return analysis (1) determine the investment’s worth; (2) state whether or not your results indicate the investment should be undertaken; and (3) state the decision rule you used to arrive at this conclusion.Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results: Assume MARR is 20% per year. Based on an external rate of return analysis (1) determine the investment’s worth; (2) state whether or not your results indicate the investment should be under taken; and (3) state the decision rule you used to arrive at this conclusion.A closely held plastic manufacturing company has been following a dividend policy which can be maximize the market value of the firm as per walter's model. Accordingly,each year at dividend time the capital budget is reviewed in conjunction with the earnings for the period and alternative investment opportunities for the shareholders.in the current year, the firm reports net earnings of rs.5,00,000. It is estimated that the firm can earn rs.1,00,000 if the amounts are retained. The investors have alternative investment opportunities that will yield them 10 per cent. The firm has 50,000 shares outstanding. What should be the D/P ratio of the company of it wishes to maximize the wealth of the shareholders?
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