7M11932: Analyse the stakeholder’s interest in a firm and Specifically in Relation to Dividends and the Whole Concept: Bachelor of Business Assignment, GMIT, Ireland
| University | Galway-Mayo Institute of Technology (GMIT) |
| Subject | 7M11932: Bachelor of Business |
Learning Outcomes
An examination is intended to enable a learner to demonstrate their attainment of specified learning outcomes. Marks will be awarded based upon the extent to which they meet or exceed the intended learning outcomes, in accordance with QQI Assessment and Standards, revised 2013.
In marking this examination, examiners will assess LO3 which will assess the learner’s ability to:
- Analyse the stakeholder’s interest in a firm and specifically in relation to dividends and the whole concept around the implication of issuing dividends to both the company and the shareholder.
Requirement
- State and explain Miller and Modigliani’s dividend irrelevance hypothesis. Your answer should refer to the assumptions underlying this argument.
- Explain and critically assess the factors that influence dividend policy in public companies. Your answer should discuss the impacts on the company v’s shareholder.
- Research a company and discuss what you believe to be their dividend policy and provide your opinion on the benefit or disadvantage to the shareholder of the policy. Discuss some points on the industry they are operating in and what theircompetitors’ policies are compared to the company you have researched.
Part B
Iorn PLC and Steel PLC have the same capital structure.
Iorn PLC has a total capital of €300,000 made up of 100% equity and Steel PLC has total capital of €300,000 made up of 50% Debt and 50% Equity.
Earnings before interest and tax was €100,000 for both firms. Steel PLC pays interest on debt of 10%. Tax rates for both firms are 25%.
a) Calculate the earning after interest before tax for both Iorn PLC and Steel PLC?
b) Calculate the earnings after interest and tax for for both Iorn PLC and Steel PLC?
c) Calculate the Return on equity in €’s for both Iorn PLC and Steel PLC?
d) Discuss your findings from part c in detail citing the importance on capital structure and other factors that need to consider when choosing the optimal structure.
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