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A Company Decided To Go Public
A Company Decided To Go Public
1. Assume that the pay-out ratio is 60%, how much of the total dividends shall a shareholder owning
10,000 common shares receive? Total dividends= (DPR)(Net income) Total dividends= (.60)(300,000)
Total dividends=P180,000 =(10,000/125,000)(180,000) The amount of total dividends that the
shareholder owning 10,000 common shares shall receive=P14,400
2. Assume that the pay-out ratio is 60% and the price per share is P20, what is the dividend yield?
Dividends yield=annual dividends per share/Price per share Dividends per share=Total dividends paid
out/Total outstanding shares Dividends per share=180,000/125,000 Dividends per share=P1.44
Dividends yield=1.44/20 Dividends yield=7.2%
3. Assume that the price-earnings ratio will be set 12 times and 25,000 new shares will be issued: 3a.
How much is the initial public offering per share of the 25,000 new shares? Price per share=(price-
earnings ratio)(earnings per share) Earnings per share=Net income-Preferred Dividends/End of Period
Common Shares Outstanding Earnings per share=300,000-0/125,000 Earnings per share=P2.4 Price per
share=(12)(2.4) Price per share/Initial public offering per share=P28.8
3b. How much is the net proceeds from the issuance if underwriter spread is 2%? =(25,000)(28.8)
=(720,000 )(1.02) =P734,400