AOA,
Please anyone can share the GDB solution of FIN622, Today is last date.
plzzzzzzzzzzzzzz help me as soon as possible. Following is the GDB Question:
In the year 2011, Wali Corporation has 100% payout ratio with earning per share (EPS) of Rs. 12 and required rate of return for such type of investment in the market is 16%. Furthermore, the share price of Wali Corporation with 100% payout is Rs. 75.
Now, Management is planning to finance a new project through retained earnings without making any change in current capital structure. For this purpose they have decided to retain 40% in current year and expecting 16% return on it.
Required:
- Whether the change in payout ratio resulted by above planning will influence the share price of Wali Corporation? Justify your answer with logical reasons in either case.
- How it can be a better option to finance a project through retained earnings instead of issuing new bonds or common shares? Give logical reasoning to support your answer.
Waslaam
Aown Abbas
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