Question 1 ABC company has a dividend payout ratio of 40% and has maintained this payout...

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Question 1 ABC company has a dividend payout ratio of 40% and has maintained this payout ratio for several years. The current dividend per share of the company is 60p per share, and it expects that its next dividend per share, payable in one year's time, will be 65p per share. The capital structure of the company is as follows: m m Equity Ordinary shares (nominal value 1 per 30 share) 30 Reserves Debt Bond A (nominal value 100) 30 15 Bond B (nominal value 100) 60 45 105 Bond A will be redeemed at nominal value in ten years' time and pays annual interest of 10%. The cost of debt of this bond is 11.5% per year. The current ex interest market price of the bond is 96.02. Bond B will be redeemed at nominal value in four years' time and pays annual interest of 7%. The cost of debt of this bond is 7.5% per year. The current ex interest market price of the bond is 105.04. ABC has a cost of equity of 15%. Ignore taxation. Required: Part 1 Calculate the following: London School of Business & Finance 1. Ex dividend share price, using the dividend growth model 2. Capital gearing (debt divided by debt plus equity) using market value 3. Market value weighted average cost of capital Question 1 ABC company has a dividend payout ratio of 40% and has maintained this payout ratio for several years. The current dividend per share of the company is 60p per share, and it expects that its next dividend per share, payable in one year's time, will be 65p per share. The capital structure of the company is as follows: m m Equity Ordinary shares (nominal value 1 per 30 share) 30 Reserves Debt Bond A (nominal value 100) 30 15 Bond B (nominal value 100) 60 45 105 Bond A will be redeemed at nominal value in ten years' time and pays annual interest of 10%. The cost of debt of this bond is 11.5% per year. The current ex interest market price of the bond is 96.02. Bond B will be redeemed at nominal value in four years' time and pays annual interest of 7%. The cost of debt of this bond is 7.5% per year. The current ex interest market price of the bond is 105.04. ABC has a cost of equity of 15%. Ignore taxation. Required: Part 1 Calculate the following: London School of Business & Finance 1. Ex dividend share price, using the dividend growth model 2. Capital gearing (debt divided by debt plus equity) using market value 3. Market value weighted average cost of capital