Critically discuss five (5) benefits of financial management to a small computer firm.Never Say Die Ltd has been growing at a phenomenal rate of 20% per year because of its rapid extension and explosive sales. Analysts believe that this growth rate will last for three years and then drop to 5% per annum. If the growth rate then remains at 5% indefinitely, what is the value of Never Say Die Ltd shares? If the dividend paid last year per share was GH₵ 12 and the cost of capital is 15%.Pure Juice Ltd sold bonds to the public five years ago to finance its operation. The bond was recently quoted at 89% of face value. The bond has a total face value of GH₵ 8.5 million and it’s currently priced to yield 9%. Pure Juice Ltd shares currently sell for GH₵ 14 per share. Fifty-three (53%) of Pure Juice Ltd 3.2 million shares are outstanding. To raise additional capital, Pure Juice Ltd issued 500 preference stock that paid GH₵ 6.5 annually per share and sold for GH₵ 95 per share. Treasury bills pay 8% and the expected return on the market is 17%. Financial experts have estimated that Pure Juice Ltd has a beta of 0.92. If the corporate tax rate is 36%.i. Calculate Pure Juice Ltd Weighted Average Cost of Capitalii. Assume that no information is provided on risk-free rate, beta and expectedmarket returns. Instead, you are told that Pure Juice Ltd Ltd paid a dividend of GH₵ 4 per share last year and will grow steadily at 6% per year into the future. The stock currently sells for GH₵ 60 a share. Calculate Pure Juice Ltd’s Weighted Average Cost of Capital

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Answered: Critically discuss five (5) benefits of…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 21P

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Critically discuss five (5) benefits of financial management to a small computer firm.
Never Say Die Ltd has been growing at a phenomenal rate of 20% per year because of its rapid extension and explosive sales. Analysts believe that this growth rate will last for three years and then drop to 5% per annum. If the growth rate then remains at 5% indefinitely, what is the value of Never Say Die Ltd shares? If the dividend paid last year per share was GH₵ 12 and the cost of capital is 15%.
Pure Juice Ltd sold bonds to the public five years ago to finance its operation. The bond was recently quoted at 89% of face value. The bond has a total face value of GH₵ 8.5 million and it’s currently priced to yield 9%. Pure Juice Ltd shares currently sell for GH₵ 14 per share. Fifty-three (53%) of Pure Juice Ltd 3.2 million shares are outstanding. To raise additional capital, Pure Juice Ltd issued 500 preference stock that paid GH₵ 6.5 annually per share and sold for GH₵ 95 per share. Treasury bills pay 8% and the expected return on the market is 17%. Financial experts have estimated that Pure Juice Ltd has a beta of 0.92. If the corporate tax rate is 36%.
i. Calculate Pure Juice Ltd Weighted Average Cost of Capital
ii. Assume that no information is provided on risk-free rate, beta and expected
market returns. Instead, you are told that Pure Juice Ltd Ltd paid a dividend of GH₵ 4 per share last year and will grow steadily at 6% per year into the future. The stock currently sells for GH₵ 60 a share. Calculate Pure Juice Ltd’s Weighted Average Cost of Capital

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