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Evaluate what the effect on the share price would be if the company paid dividend to shareholders?

Question 4 [25 Marks] (a) Mayo Corporation Malaysia is currently trading at $30 per share. There are 10 million shares outstanding, and the company has no debt. You believe that the value of the company would increase by 50% if the management were replaced. Calculate how much you would gain from acquiring 50% of Mayo's shares by borrowing, attaching the debt to the company and replacing the management. (16 Marks) (b) As a financial analyst, you have to evaluate two firms, Salma & Co and Ahmad & Co. Both companies will either make $30 million or lose $10 million every year with equal probability. The companies' profits are perfectly negatively correlated. Calculate the expected after-tax profits of Salma & Co. in any year, assuming a corporate tax rate of 35% and no tax loss carry back or carry forward. (9 Marks) Question 4 [25 Marks] (a) Mayo Corporation Malaysia is currently trading at $30 per share. There are 10 million shares outstanding, and the company has no debt. You believe that the value of the company would increase by 50% if the management were replaced. Calculate how much you would gain from acquiring 50% of Mayo's shares by borrowing, attaching the debt to the company and replacing the management. (16 Marks) (b) As a financial analyst, you have to evaluate two firms, Salma & Co and Ahmad & Co. Both companies will either make $30 million or lose $10 million every year with equal probability. The companies' profits are perfectly negatively correlated. Calculate the expected after-tax profits of Salma & Co. in any year, assuming a corporate tax rate of 35% and no tax loss carry back or carry forward. (9 Marks)

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