Net profit of Green Forest Ltd in the current year is $2,355,000. The company is planning to launch a project that will requires an investment of $ 945,000 next year. The common stock of the company...

Net profit of Green Forest Ltd in the current year is $2,355,000. The company is planning to launch a project that will requires an investment of $ 945,000 next year. The common stock of the company goes ex-dividend tomorrow. The stock closed at a price of $35.65 per share today. The company is paying a cash dividend of $4.50 a share and an extra cash dividend of $1.5 a share.

a) Calculate the net profit available for dividend payment and dividend payout ratio of the company, assuming the capital structure of the company is 60% equity funding, 40% debt funding, using the Residual Dividend Payout Policy.

b) Assuming the tax rate on dividends is 25%. Calculate the ex-dividend price tomorrow

c)

1. Blue Valley Ltd, a subsidiary of Green Forest Ltd will go under liquidation procedures due to the recent global economic recession in one-year time. The company just announced today it will be paying an annual dividend totally $7.5 million this year and $12.5 million one year from now as a liquidating dividend. The company plans to raise $ 6 million to fund the business operation within 1 year by issuing new shares. The required rate of return for shareholders is 11.5%.

Calculate the current value of the firm’s equity in total and per share if the firm has 2.5 million shares outstanding before issuing new shares.