Module 6 Practice Exercise Assignment Example | Topics and Well Written Essays - 500 words

Module 6 Practice Exercise - Assignment Example The gross proceed from the stock sale is 3.080 million dollars. Lil John Industries’ equity includes 1.6 million outstanding shares selling at a price of 33 dollars per share. The total funds raised from equity are 52.8 million dollars. There are 26,000 bonds outstanding selling at 104 percent. The total debt is 26000*1.04*1000=27.04 million dollars. The debt equity ratio is 27.04/52.8=0.5=1:2.assuming the par value to be 1000 dollars. In scenario one where there is no debt, the EPS is obtained through dividing the outstanding shares with the EBIT. In the recession, the EPS is 4.8/9.44=0.51. In the average condition, the EPS is 9.8/9.44=1.04 million. In the boom condition, the EPS is 16.8/9.44=1.78 million. The retention ratio refers to that proportion of the net income paid out through other means and not paid as dividend. It is calculated by subtracting one from the dividend payout ratio (Springer, 2011). Springer L. (2011). How to Find a Stocks Value Using the Dividend Discount Model. Retrieved from