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:
1. 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.
2. 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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