solution

The company has a target capital structure (D/E) of (5/4). Other related data are listed in the table below: Net Income Common shares outstanding (Shares) The Ex-dividend Date The market share price on 10th of January 2020 The market share price on 14th of January 2020 $ 140,000,000 10,000,000 15th of January 2020 $ 18 $ 20 Consider the residual dividend policy to answer the below questions: a. What is the amount of dividend paid? (2 marks) b. What is the DPS (Dividends Per Share)? (1 Mark) C. What is the dividend Pay-out ratio? (1 mark) d. What was the market share price on 15th of January? (1 Mark) e. You bought 10,000 shares of Ali Redha Co. on 10th of January. Few days later, you sold the shares on 15th of January, calculate the amount and the rate of profit (or loss) of your investment? (2 Marks) f. Under the Residual Dividend Policy, If the company had only $ 100,000,000 Net Income, explain how Ali Reda company will fund the new investment projects (what are the source of funds). Note that all other given data are not changed.