TEST $-$ BAFB$3013$ Financial Management $($CLO$2)$

Name:

Matric No:

b$.$ Honey Sdn Bhd $($HSB$)$ anticipates that its earnings this year will be RM$2,550,500$ this year with an EPS of RM$2\mathrm{.}50.$ If HSB wants to maintain a constant dollar policy where the dividend per share last year was RM$1\mathrm{.}50,$ what will be:

i$.$ the total dividend payout this year?

$(2$ Marks$)$

ii$.$ the retained earnings this year?

$(2$ Marks$)$

iii. the dividend payout ratio this year?

$(2$ Marks$)$

iv$.$ the retention ratio this year?

$(2$ Marks$)$

$(8$ Marks$)$

$($Total: $20$ Marks$)$

Question $3($Show your workings$)$

LMN Sdn Bhd$.($LSB$)$ expects EBIT of RM$2,000,000$ for the coming year. The firm's capital structure consists of $40\%$ debt and $60\%$ equity, and its marginal tax rate is $27\%.$ The cost of equity is $14\%$ and the company pays a $10\%$ rate on its RM$5,000,000$ long$-$term debt. One million shares of common stock are outstanding.

In the next capital budget cycle, the firm expects to fund one large positive NPV project costing RM$1,200,000$ and it will fund this project in accordance with its target capital structure. If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio? What is the dividend per share?

$($Total: $20$ Marks$)$