Scenario analysis (i) You are leading a role of Chief Financial Officer of a Cement Company in Oman. Your company has huge current profit of RO 10 million and presently having a plan to capital investment of RO 8 in the next financial year. The company is willing to continue capital structure of debt 25% and Equity 75% in the future. How much of the RO 10 million should your company pay out as dividends? And what would be the dividend payout ratio of your company? (ii) In case you retain huge amount of profit of your company for long term investment, what financial decision do you take – to pay high cash dividend? Or to issue bonus share (stock dividend)? And explain why?
Scenario analysis (i) You are leading a role of Chief Financial Officer of a Cement Company in Oman. Your company has huge current profit of RO 10 million and presently having a plan to capital investment of RO 8 in the next financial year. The company is willing to continue capital structure of debt 25% and Equity 75% in the future. How much of the RO 10 million should your company pay out as dividends? And what would be the dividend payout ratio of your company? (ii) In case you retain huge amount of profit of your company for long term investment, what financial decision do you take – to pay high cash dividend? Or to issue bonus share (stock dividend)? And explain why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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3. Scenario analysis
(i) You are leading a role of Chief Financial Officer of a Cement Company in Oman. Your company has huge current profit of RO 10 million and presently having a plan to capital investment of RO 8 in the next financial year. The company is willing to continue capital structure of debt 25% and Equity 75% in the future. How much of the RO 10 million should your company pay out as dividends? And what would be the dividend payout ratio of your company?
(ii) In case you retain huge amount of profit of your company for long term investment, what financial decision do you take – to pay high cash dividend? Or to issue bonus share (stock dividend)? And explain why?
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