Question 4 (20 marks) Jacky Enterprises Ltd will announce its earning result this year The company earns $8 million dollars The CEO is now considering the companys investment and dividend policy The current capital structure is 40 of debt and 60 of equity The CEO thinks that the company should maintain the current capital structure The companys WACC is 15 You are the financial advisor of Jacky Enterprises Ltd, please answer the following questions If the companys new investment project A requires $10 million dollars The expected return of the project A is 18 , should we accept project A Please explain Compute the amount of dividend to be paid, if any Will the company need to issue new debt and or equity Please explain Assuming that the project A is rejected for some uncontrollable reasons and the CEO is now considering another project B Project B requires $15 million dollars and its expected return is 16 If project B is accepted, please compute the amount of dividend to be paid Will the company need to issue new debt and or equity to finance this project Please explain

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Question: Question 4 (20 marks) Jacky Enterprises Ltd will announce its earning result this year. The company earns $8 million dollars. The CEO is now considering

Question 4 (20 marks)

Jacky Enterprises Ltd will announce its earning result this year. The company earns $8 million dollars. The CEO is now considering the companys investment and dividend policy. The current capital structure is 40% of debt and 60% of equity. The CEO thinks that the company should maintain the current capital structure. The companys WACC is 15%. You are the financial advisor of Jacky Enterprises Ltd, please answer the following questions.

If the companys new investment project A requires $10 million dollars. The expected return of the project A is 18%, should we accept project A? Please explain.
Compute the amount of dividend to be paid, if any. Will the company need to issue new debt and/or equity? Please explain.

Assuming that the project A is rejected for some uncontrollable reasons and the CEO is now considering another project B. Project B requires $15 million dollars and its expected return is 16%. If project B is accepted, please compute the amount of dividend to be paid. Will the company need to issue new debt and/or equity to finance this project? Please explain.

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