Evaluate the benefits and limitations of the change to the operations process being planned by the managing director.
1 answer:
You might be interested in
Answer:
Preference shareholders = $36,000
Equity shareholders = $9,000
Explanation:
As provided the outstanding preference dividend at end of 2012 = $12,000
Total cash dividends declared = $45,000 in the year 2013
Regular preference dividends = $100 3,000
8% = $24,000
Thus, when dividends will be paid in 2013 then firstly they will be used for payment to preference shareholders.
Thus, the company shall pay:
$12,000 + $24,000 = $36,000 to preference shareholders.
Further the balance will be paid to equity shareholders.
= $45,000 - $36,000 = $9,000
The cost of equity from retained earnings based on the DCF approach=9.44%
Explanation:
- The cost of equity from retained earnings based on the DCF approach can be calculated as follows,
- For D1 = $0.67
- For P0 = $27.50
- For g = 7.00%
- Therefore, rs =
+ g
- The answer is =9.44%