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hi again john , i am having issues in following mcqs :
Q.share capital 1000 000 shares of $0.5 and 500 000 8% pref shares profit after tax (30%) $420 000, EPS ?
what i did was EPS = profit after tax/ ordinary shares , 420000/1000000 but still got it wrongQ Xplc has dividend yield of 8% and dividend cover of 2.4 , P/E ratio ?
dividend yield = dividend per share / market price per share
dividend cover = profit after tax/ DPS
since PE ratio mv of shares / eps how is it possible to calculate itQ. ajt co has a gearing ratio debt:(equity+debt) of 30% , tax is 25 % beta asset is 1.2 , i know we have to use asset beta formula but how do i use the gearing ratio ?
Q and lastly demand is 7500 units per month unit cost is 5% order cost is 100$ and inventory holding cost is 10% of purchase price price year , lead time is 30 days i have caluclated eoq of 6000 and question asks at what inv should a new order be placed ? and my answer is wrong obviously , how so
First question:
You need to use the profit available for ordinary shareholders, which is 420,000 less the preference dividend of 40,000.
Second question:
Dividend cover = EPS / dividend per share.
So PE = MV/EPS = (divi/divi yield) / (divi cover x divi)
= 1 / (divi yield x divi cover) = 1/ (0.08 x 2.4) = 5.21
Third question:
If equity + debt = 100, then debt = 30% x 100 = 30. Therefore equity = 70.
(Use any numbers you want because the ratio in the formula will not change, but 100 is the easiest number to use 🙂 )
Fourth question:
The EOQ is not relevant here.
They need to place an order when they have enough left to last the lead time (the time to receive the new delivery).
The lead time is 30 days. The demand per day is (7500 x 12)/365 = 246.575
So the reorder level must be 30 x 246.575 = 7,397
(You had better check my arithmetic, I am a bit sleepy 🙂 )
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