II. PROBLEM SOLVING.

(ME-CM)
Instructions: Solve and show the formula (refer to Problem Solving Sample for formula) solution in a clean bond paper
legibly. Save it in .pdf file then upload to Moodle.

1. Solve for the dividend per share if a company has paid P600,000.00 in dividends during the period and there are 1.5
million shares of common stock outstanding.

2. If XYZ has paid P375,000.00 in dividends during the year and the common stock outstanding is 750,000, the
divided per share is…

3. Solve for the dividend payout ratio if the company pays P360,000 in dividends and has earnings available to
common shareholders of P1.2 million.

4. If ABC pays P180,000.00 in dividend and has P900,000.00 earnings available to common shareholders, the payout
ratio is…

5. A. Consider a company that currently pays dividends of P3.00 per share. If the dividend is expected to grow at a
rate of 3% per year and the discount rate is 12%, what is the value of a share of stock of this company?
B. If the growth rate for this company’s dividends is 5%, instead of 3%, the current value is?
C. If the discount rate is 14% instead of 12% and the growth rate of dividends is 3%, the value of a share of stock
is?

6. A. Solve for the fair value of share of stock of the Rolex company that presently pays a dividends of 6 per share.
With a growth rate is 6% per year and with a discount rate of 10%.
B. If the growth rate for this company’s dividends is 8%, instead of 6%, the current value is?
C. If the discount rate is 16.5% instead of 14% and the growth rate of dividends is 3.5%, the value of a share of
stock is?

7. Compute for the conversion value with the following data given to by LMN Company:
Stock price P30.00 per share
Stock dividend 0.50 per share
Convertible market price P1,000.00
Coupon rate 7%
Maturity 20yrs
Conversion price P36.37

8. CCC Companies stock price was P15.89 For the CCC convertible issue, the conversion ratio is 196.0784 shares
with a conversion value per $1,000 of par value. Find the following”
A. Conversion price
B. Conversion value

9. XYZ Company have a P1,500.00 par value. The bonds have annual coupon and carry a conversion price of P75.00
per share. P78.00 per share is the stock price today. Compute for
a. Conversion value
b. Conversion premium

10. ABC has 5 million of 500 per value convertible bonds outstanding. The bonds carry a 6% annual coupon rate. The
bond holder may exchange the bonds for 25 share of common stock. The conversion value of bonds is P575.00 as
of today.
Compute for:
a. Conversion price
b. Market price