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Additional Information: Current market price per common share = $ 195 Before tax...

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Finance

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Additional Information:

Current market price per common share = $ 195

Before tax cost of borrowing (secured loan) = 5%

Weighted Average Cost of Capital =12%

Net Income for 2021 = $925,000

Target D/E ratio based on market values = 0.25

Corporate tax rate = 35%

Suppose instead, Evergreen uses a residual dividend policy. Their capital budget for the upcoming year = $1,600,000. Calculate the debt, external equity financing required and the dividends per share.

Evergreen Inc. Statement of Financial Position As at Dec 31, 2021 Assets Cash $ Accounts Receivable $ Inventories $ Total Current Assets $ Net Fixed Assets $ 425,000 400,000 500,000 1,325,000 18,000,000 Liabilities Accounts Payable Other Current Liabilities Total Current Liabilities $ $ $ 300,000 425,000 725,000 LT Debt Common Stock (85,000 shares o/s) Retained Earnings $ $ $ 2,500,000 4,500,000 11,600,000 Total Liabilities & Owners Equity Total Assets $ 19,325,000 $ 19,325,000

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