The ABC firm started its own business three years ago.It issued 50 m debt and 120...

The ABC firm started its own business three years ago.It issued 50 m debt and 120 m stocks. the firm grow now and the value of it 150 m , ABC wants to reward its shareholders, how much should ABC give?
Numeric and Graphed answer please

Expert Solution

If the value of 150 m given is that of business as whole then the value has instead reduced because

Share value = total value - debt value

so share value comes toh 100 m

so these should not be any dividend payment based on this much information

But if the value of 150 m is that of shares then company can pay dividends starting from 0 to 30 m (150m-120m). Since the business is growing as said in question, it is better to keep the money invested and earn from that money rather to pay dividends.

jeff jeffy answered 2 years ago

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