XYZ Ltd. currently has 1 lakh equity shares outstanding. Current market price per share is Rs. 20. The net income for the current year is Rs. 20 lakh and investment budget are Rs. 40 lakhs. Cost of equity is 10 %. The company is planning to declare dividend @ Rs. 8 per share. Assuming MM Approach: (i) Calculate market price per share if dividend is declared and if it is not declared. (ii) How many new equity shares are to be issued under both options?
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1.Dividends per share is calculated by dividing the total number of dividends paid out by a company (including interim dividends) over a period of time, by the number of shares outstanding.
2.New Equity Issuance means the issuance and sale by the Borrower of its common stock (which may include warrants) to the Investors in exchange for net cash proceeds of at least $7,500,000 on terms and conditions set forth in the Rights Offering Documents or other terms satisfactory to the Required Lenders.
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